Guarantor Loan 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 our guarantor loan you can cancel your agreement by writing to your chosen lender within 14 days, starting on the day after the loan is 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 do 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. Lenders are continually striving to make these documents as simple to understand and as short as possible. 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 Reference Agencies
These are agencies which collect information about you from the electoral roll, County Court Judgements (CCJs), and information supplied by other lenders. This can include information such as if you have ever fallen behind with payments for previous loans, how many cheques you have had bounced, your bill-paying history, the number and type of accounts you have, collection actions, outstanding debt, and the age of your accounts.
Our lenders submit details on how you manage your loan to credit reference agencies and other potential lenders may view this information. If your lender is forced to issue a CCJ against you or your guarantor the CCJ will be recorded for six years from the date of the judgement - unless the judgement was paid in full within one month of judgement being given, when the court can remove the record if you contact them.
If a CCJ is paid after more than one month, it can be marked as 'Satisfied'. When you apply for credit (credit card, loan, mortgage), a lender will check your credit score and use this information in its own Credit Scoring process. Equally, if you have had credit problems but successfully repay your guarantor loan your credit status will have been improved and this will be recorded by the credit reference agencies so improving the potential for future loans.
Credit Scoring
Credit scoring is a system lenders 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 it is 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 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 your lender has 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 your lender has made as a result.
Data Protection Act
The Data Protection Act (DPA) was passed in 1998 and was designed to protect the rights of individuals' information and regulate the use of your information in financial, and other institutions. The Act covers all personal data (information) about you processed by us and other institutions which will have information about you.
With this in mind, information about you has to be dealt with fairly and lawfully, must be accurate and up to date, and not transferred to other parties without your prior consent. This is why our lender performs a Security Check when you speak to them, so they can be sure information about you and your financial history does not fall into the wrong hands.
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 your 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.
Direct Debit Guarantee
Your Direct Debit Guarantee will be at the bottom of your Pre-Contract Information Document which will be sent to you along with your Credit Agreement. The Direct Debit Guarantee ensures that your lender treats you fairly when using Direct Debit to take monthly repayments on your guarantor loan from your bank account.
Early Settlement
If you decide to settle your guarantor loan early you have the option to pay the outstanding balance in one go as an Early Settlement. Once you have repaid the remaining guarantor loan amount in full you will no longer have to pay the monthly repayments. Your lender will provide you with an Early Settlement Figure which will provide you with details of any rebate owed to you and any administration costs incurred in settling early.
Early Settlement Figure/Sum
If you decide to settle your guarantor loan early your lender will provide you with an Early Settlement Figure. This figure will be the total amount due to be repaid to your lender and will include any administration charges or details of any rebate due to you. They will send a copy of their 'Early Settlement' leaflet in your guarantor loan agreement pack when you apply for a loan.
Early Settlement Figure Statement
If you decide to settle your guarantor loan early your lender will provide you with an Early Settlement Figure Statement. This statement will detail your guarantor loan amount, number of repayments made and present you with the final Early Settlement Figure still owed to your lender. This figure will be the total amount due to be repaid and will include any administration charges or details of any rebate due to you. Your lender will send a copy of its 'Early Settlement' leaflet in your guarantor loan agreement pack when you apply for an guarantor loan.
Express Next Working Day Transfer
Once your lender has received your documentation saying you agree to take out your guarantor loan and you have given them bank details, they will arrange for the loan to be paid out within 1 working day if you have selected the Express Next Working Day Transfer. If you have not selected the Express Next Working Day Transfer the amount will be paid out usually within 2 working days. A charge applies to the Express Next Working Day Transfer.
Financial Associate
Whenever you hold or apply for a joint financial product with another person, you become financially 'associated' with that person on the files of the Credit Reference Agencies. This means that your credit records are linked with the other person's. If you apply for credit in the future, the lender will carry out a Credit Search that may include details held on anyone with whom you are financially associated.
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 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 lender will send you a first reminder letter, and then a formal reminder letter to make your repayment. A Late Payment Charge of £20 comes with the Formal Reminder letter.
Guarantor
A guarantor is a person who is willing to guarantee the repayment of a loan agreement. Your loan guarantor could be a friend or family member and must be in full time employment with a good credit history. Although your lender does sometimes accept guarantors who are self employed, tenants or living with parents credit checking and income requirements may be more stringent in these circumstances.
Guarantor Loan
A guarantor loan is an unsecured loan of up to £3000 for which you DO NOT need to be credit checked or credit scored. 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 lenders don't need to credit check you. And since they don't use any computerised credit scoring techniques they can say "Yes" where ordinary banks and building societies can't. Your credit history is irrelevant! Apply now.
Guarantee and Indemnity
This document that lays down the agreement under which a person can stand as Guarantor for a guarantor loan credit agreement. The Guarantee and Indemnity document is normally a pink form and will probably be contained in the 'application pack' that you receive from the lender. The lender's Guarantee and Indemnity Form will contain information on the loan agreement as well as details about how your personal information will be kept and used by them, and a Direct debit Mandate which may be used to collect repayments in the event that the applicant fails to meet their commitments under the Credit Agreement.
Home Owner Loan
With most Unsecured Loans you can typically borrow up to £10,000 with a maximum repayment period from 5 to 10 years. When a loan is unsecured it means there is no absolute guarantee the loan will be repaid. A Home Owner Loan is different because it is secured on your home. This works like a mortgage, so the loan amount can be larger and the repayment period can be longer. The APR is also a lot less on a Home Owner Loan, which makes a cheaper, more secure finance solution for the long term. You can borrow up to 125% of the value of your property subject to status over a timescale ranging from 3 to 30 years. You can apply for a secured homeowner loan at our sister website. Note: a guarantor loan is not a home owner loan as you do not need to be a homeowner to get one.
Joint Applications
A joint application is an application made by two people, normally the main applicant and their spouse. A second applicant is not the same as a Guarantor. Even if your application is a Joint Application you may still require a guarantor depending on your credit score.
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 of £20 comes 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 of £20. 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 for your guarantor loan. 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). You may receive loan offers from more than one lender in which case you will be able to compare and choose which is right for you.
Loan/Personal Loan
A Personal Loan is a way of borrowing a large sum of money. Personal loans can be either secured or unsecured. The loan is usually given in a lump sum, and will be repaid by you in Monthly Repayments. Our lenders specialises in Loans of between £500 and £3,000 for people who have been refused by their Bank or other financial institutions. Personal Loans are generally for a fixed term and our lender will allow early repayment at any time with no penalty. With our lender all you pay is interest for the number of days that the money has been borrowed for.
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 lenders are completely flexible you may make an overpayment at any time. Simply contact your lender's Collections Department for more details.
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. Note: a guarantor is not a secured loan.
Security Check
If, for any reason, you need to contact your lender during the period of your loan, they will need to perform a Security Check, to make sure they are talking to the right person (you). This complies with the Data Protection Act (DPA). Sensitive information about your address and financial dealings could put you at risk if it is revealed to the wrong person. So for your security, when you call them they will ask you a number of questions that confirm your identity. This could be your address, your date of birth, or some information about your loan, for example how much it was for and how much you pay back each month.
Sickness Cover
If you take out a Loan Payment Protection Plan that covers critical illness when you take out your loan, your payments will be covered if you develop a critical illness during the period of your loan. Your loan will be repaid in full if you have been diagnosed by a specialist as suffering from a serious medical condition. You can claim critical illness if you fail to make your loan repayments because you can no longer work. If you are merely sick and you have to take some time off work to recover, your loan repayments will not be covered under the Critical Illness Cover and you will still be liable for repayments.
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. Our lenders specialise in Tenant Loans, as guarantor loans are available to both tenants and homeowners.
Total Amount Payable
Once the lender has decided on your Loan Amount and Loan Period they 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 (i.e the loan offer) 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. Unsecured Loans are also referred to as Tenant Loans. Our lenders specialise in Unsecured Loans.
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