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Guarantor Loans Jargon Buster

 

APR/Annual Percentage Rate

The Annual Percentage Rate (APR) is the percentage of interest charged against your loan each year. It takes into account the value of the loan from the start of the loan period to the end of the loan period. As with anything you buy, there are charges, and the APR rate is a way of comparing prices of loans from one company to the next, to get the best value for money. If the typical APR is 7% on a loan of £1000 for example, you will pay 7% of the total loan amount each year of the repayment, as interest and charges, which will automatically be part of your repayments.

Cooling Off Period

The law states that every lender must allow a cooling off period of at least 10 days during which a borrower can cancel their loan and repay the balance without a penalty charge. With guarantor loans you can cancel your agreement by writing to the lender within 14 days, starting on the day after the loan granted.

County Court Judgements

Like all loan companies our lenders will use legal methods to ensure that every repayment is made as agreed. If you are unable to meet your repayments you may face a County Court Judgement (CCJ) which will charge you with the amount owed and give you one month in which to pay the full amount. If you do not pay the full amount within one month your CCJ will be registered with the Register of County Court Judgements and Credit Reference Agencies will note this on your file. This may make it difficult for you to obtain credit, loans or mortgages in the future. Some employers and landlords now also credit check meaning that having a CCJ against your name may harm your chances of getting work or renting a home. Our lenders does not use court action lightly and will always try other methods before going to court to reclaim money owed.

Credit

Credit is a term that describes the lending of money from a financial institution to an individual or company. If you apply for a guarantor loan you are effectively applying for credit.

Credit Agreement

The document that lays down the agreement under which your guarantor loan is arranged. The Credit Agreement is normally a blue form and will probably be the first document that you would receive from your chosen lender. Your guarantor loan Credit Agreement will contain information on the loan as well as details about how your personal information will be kept and used by the lender. Also included are any Direct debit Mandates.

Credit Scoring

Credit scoring is a system creditors use to help decide whether to give you credit. When you apply for a loan you give information about yourself - your age, occupation, and your financial history - your bank accounts, details of your mortgage provider, and any previous loans you may have had. Your information is then statistically compared to the credit performance of consumers with similar profiles. In other words, they try to predict how big a risk they would be taking by allowing you to borrow up to a certain amount. If your total score reaches a certain level, then you 'pass' the credit score. If you don't score enough points, they may turn down your application, or, offer to lend you a smaller amount than you were hoping for.

 

Guarantor loans are different - whilst our lenders do also consider these points a decision is always made by a human being based on their experience and judgement. They never allow a computer to make a decision on its own as to whether they will lend to somebody.

Credit Search

This is a search that our lenders make on your name and address with a Credit Reference Agency in order to assess your credit history. Their search will then be noted against your records. This will inform other institutions that our lenders have requested information about you. If they have asked for a guarantor for your case they will also conduct a credit search on their details. The credit reference agency will never be informed of the decision that our lenders have made as a result.

Direct Debit/Direct Debit Mandate

Direct Debit is a safe and quick way to pay back instalments of your loan from your bank account. Once you have purchased your loan you give the your chosen lender a mandate to take the agreed repayments from your account on the same date of every month until the guarantor loan is completely repaid.

E-Signatures & Online Applications

Our lenders are constantly improving their processes with the aim to speed up the application process. It is now possible to complete the full loan application online without having to complete any physical paperwork. This culminates with you (& your guarantor) signing the documents eectronically rather than with a biro! It means it is now possible for you to receive your loan into your bank account within 24 hours of your loan application being accepted.

Financial Ombudsman Service

The Financial Ombudsman Service is a free service provided by the Government and set up by the financial regulator, the Financial Services Authority (FSA). The service is a means through which you can seek advice if you have a complaint about any financial product or service that has been provided to you. If you have been unable to resolve the dispute with your chosen lender within eight weeks of your first complaint you may then pass the complaint to the Financial Ombudsman Service, who will deal with your complaint and assess whether you have been treated fairly.

Formal Reminder

If you are late in meeting the repayments of your loan your chosen lender will send you a first reminder letter, and then a formal reminder letter to make your repayment. A Late Payment Charge will be made with the Formal Reminder letter.

Guarantor

A guarantor is a person who is willing to guarantee the repayment of a loan agreement if the borrower cannot. Your loan guarantor could be a friend or family member and must be in full time employment with a good credit history. For small value loans of up to £500 the guarantor does not have to own their own home. For loans over £500 the guarantor probably needs to be a home owner although some lenders are beginning to relax this criteria.

Guarantor Loan

A guarantor loan is an unsecured loan of up to £12,000 for which you provide a guarantor in exchange for a reduced reliance on credit scoring. Someone who knows you well (e.g. parent, relation or close personal friend) agrees to act as the loan's guarantor. Because the guarantor backs your application the lender doesn't need to use credit scoring as the sole basis of their lending decision. More often they can say "Yes" where ordinary banks and building societies can't. Your credit history is irrelevant! Apply now.

Late Payment Charge

If you fall behind on your repayments the lender will send you a reminder letter to let you know you have missed a payment. A Late Payment Charge is made with the Formal Reminder letter.

Late Payments

If you fall behind with your guarantor loan repayments this is called a Late Payment. If your payment is late the lender will send you a reminder, and then a Formal Reminder, which will incur a charge. If you make the payment, or contact the lender and let them know any reasons why you have not paid and any cover you may have i.e. critical illness or involuntary unemployment, the lender will not take the matter any further. However if you still do not make the payment they may have to seek a County Court Judgement, which could affect your Credit Rating.

Loan Agreement

Your loan agreement is the formal contract you are given which states the terms of the loan, the repayment period, APR and loan amount. The agreement is a binding contract that says that you agree to the terms and conditions of the loan and that the lender agrees to lend you the full amount. You should keep your customer copy of the Loan Agreement for reference purposes.

Loan Agreement Pack

Your Loan Agreement Pack will come in the post and via email shortly after you have applied and been accepted in principle by your chosen lender. The pack will include all of the relevant information you need to know about your guarantor loan, including the APR, agreement terms, length of your loan and monthly repayments. The pack will also include a form of your Loan Agreement for you to sign and a customer copy of the un-executed copy of the Loan Agreement for you to keep. Upon signing and returning the Loan Agreement to the lender you will enter into a binding contract that confirms you want the loan and you are willing to make the monthly repayments. Once the lender has received the signed Loan Agreement the lender will send your loan funds to you.

Loan Application

Your Loan Application is usually the first contact the lender has from you to say that you would like a loan. Once the lender has looked at your details they will issue an offer in the form of a Credit Agreement Form. This may also be accompanied by a Guarantee and Indemnity Form for your Guarantor to complete. Once the lender receives these forms along with any other documentation that they require they will then perform a Credit Search with one or more of the Credit Reference Agencies and they will make a decision on your application taking in to account your full financial details and those of your Guarantor (if applicable).

Loan Term/Loan Period

The loan term or period is the amount of time you agree to pay back the amount you have borrowed with your guarantor loan. The term/period exists from the start date of your loan to the end date of your loan. That is, from the date you receive your loan to the date you make your final repayment. On your Loan Credit Agreement you will find the Loan Period on the Key Financial Information section under 'Estimated Term'.

Monthly Repayments

Once you have agreed to the amount of your loan, you will agree to pay back your guarantor loan in monthly instalments. This is to avoid having to pay the loan back in one lump sum. These monthly repayments are a manageable amount, and will be of the same amount every month The monthly repayments will come out of your bank account each month by Direct Debit unless otherwise agreed. On your Loans Credit Agreement you will find the Loan Period on the Key Financial Information section under 'Monthly Repayments'.

Overpayments

Overpayments are where you pay more than your monthly repayment each month on your guarantor loan. As our lender is completely flexible you may make an overpayment at any time. Simply contact your their Collections Department for more details. Overpayments mean that you are paying your loan off more quickly and is a good way of reducing the total cost of your loan.

Payment Holidays

As the name suggests, a payment holiday is a period of time where you do not have to make your regular monthly repayment. This feature is not available with guarantor loans, so you will make your repayments each month until the loan is paid off.

Pre Contract Information

Your Pre Contract Information document will be sent to you with your Credit Agreement. The document includes details of the length of your loan, the amount you have borrowed, the APR, the amount and date of each monthly repayment. You should keep your Pre Contract Information document for reference purposes along with the Terms and Conditions document.

Repayments

Once you have agreed to take out your loan you will be liable to repay it in manageable monthly repayments for as long as your Loan Period. A Direct Debit Mandate will be set up with your bank to make automatic safe monthly repayments from your bank account. Once the loan has been completely repaid, you will no longer need to make any repayments.

Secured Loan

A Secured Loan is any loan that has a provision for the return or collection of an asset when payments are not made. Secured loans are usually made for cars and houses. This means that if you take out a secured loan on your house, and you fail to make the repayments, the value of the loan will be collected from you, which means you may lose your house if you do not make your monthly repayments. You can apply for a secured loan at our sister website. A guarantor loan is an unsecured loan as no assets are held as security.

Tenant Loan

A Tenant Loan is another term for an Unsecured Loan. Tenant loans are aimed specifically at people who do not own any property. Tenant loans are a way for people who rent their accommodation from the council, private landlords or who live with parents to apply for a loan. Guarantor loans are a useful form of credit for tenants who cannot use their home as security.

Total Amount Payable

Once the lender has decided on your Loan Amount and Loan Period we will calculate the Total Amount Payable, which will include the original amount you have borrowed, and the total amount you will have paid once all of the repayments have been met on time. The amount will include your APR and will not include any charges made for Late Payments. This information will be sent to you on the Pre-Contract Information Document and on your Credit Agreement.

Unsecured Loan

When a loan is unsecured it means there is no provision for the return or collection of the loan when payments are not made. For this reason the APR's tend to be a little higher than a Secured Loan, and the repayment period is shorter. Our lenders specialise in Unsecured Loans.

 

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Solution Loans is a trading style of Affiniti Digital Media Ltd. Registered Office: Moorgate House, 7 Station Road West, Oxted, Surrey, RH8 9EE. Registered in England & Wales, number 5180470. Solution Loans is authorised and regulated by the Financial Conduct Authority (FRN 726074). Registered with the Information Commissioner's Office - Z8703415. Solution Loans acts as an introducer to guarantor loans lenders.