When it comes to taking out any type of loan, there are a number of checks that will always be completed on you the borrower and the guarantor in this case. Guarantor loans can range from £500 to £12,000 and the process will usually begin with an online application and can take around 5-10 minutes to complete. Various data is required to complete an application such as name, address, age, type of residence, employment and financial affordability questions. The details taken on the application form ensures that the lender protects themselves and to make sure that the borrower is eligible and suitable for the loan based on the amount that they want to borrow.
The lenders have a responsibility to ensure that the loan that is offered is a suitable rate and can be repaid back, as often with late payments not keeping to the schedule set out by the guarantor lender will result in additional charges. Under the Treating Customers Fairly legislation the lenders have a responsibility to carry out these check.
Guarantor Lenders Affordability Checks
Affordability checks are carried out by guarantor lenders to match how much the customer wishes to borrow against how much they can afford to actually repay. Trying to get a loan of the maximum amount that a lender offers to every customer would not be considered to be responsible lending and would go against the The Financial Conduct Authority so affordability checks are a must by every lender. Guarantor Loan companies will need to assess the customers income and outgoings to get a better understanding of how much they can afford to lend.
Affordability checks also include asking customers in the initial application form about how much they earn each month from their employment, how often they are paid, monthly expenses including credit cards, rent and other financial commitments. Lenders will often request copies of wage-slips or bank statements including other identification. Once affordability checks are carried out the lenders may give the borrower a more suitable loan amount which may be lower then the initial loan amount on the application or on some occasions they may inform the customer that they cannot afford the repayment and are not eligible for the loan.
Credit Checks Run by Guarantor Lenders
Guarantor Lenders will carry out credit checks as a part of the loan application process, the guarantor work with varies credit reference agencies such as Equifax and Experian who will often run these searches on both the applicant and the person who is going to be the guarantor for the borrower. Please be aware if the borrower has a poor credit history all is not lost as long as your guarantor has a strong credit history you could still be approved. These searches may be both full credit searches or something called soft search which will not a leave a mark on either borrower or guarantor credit file.
Credit Checks are widely used when applying for any types of loan as its important for the lender to build up a profile, and to see if they have a bad or good credit. The lender can establish the risk towards them as a company.