Guarantor loans have to go through a few more steps than a traditional personal loan in order to get approved and funded. They’re not normally a case of “computer says no” or “computer says yes” – more often than not, a human being (rather than an algorithm) will make the final decision on your application.
Your guarantor will need to complete their part of the application, and the lender may want to talk the loan over with both you and your guarantor before proceeding.
If a lender promises “instant” guarantor loans, it’s not being straight with you. However, if it promises “instant payout” this means it will pay out immediately following approval. As a guarantor loan involves three separate parties – the lender, the borrower and the guarantor – the process tends to be slower than a traditional loan application, although a same day application and transfer of funds is possible.
These are the typical steps that your application for a guarantor loan will go through:
While most lenders will attempt to process and approve your loan on the same day, there’s a variety of things that can delay your application, or even result in it being rejected. If you and your guarantor make sure your application form is as accurate and honest as possible, you will increase your chances of approval.
One guarantor lender that we spoke to explained that it is more often the guarantor (not the applicant) that fails the approval process.
Although a lender may offer an “instant” approval, there are a number of factors which could affect the time it takes to process and approve your application and transfer the funds.
Many lenders offer a same day approval service, which is possible as long as you and your guarantor meet the specified criteria.
When we spoke to one guarantor lender, it said it could take as little as 45 minutes to approve and fund a loan application. More commonly, it could take a couple of days.
Jacob and Marie needed £4,000 for last-minute flights to Australia to attend a funeral after his mother died. Their limited credit history meant they were unable to secure a personal loan from a high street bank. Some specialist lenders were willing to lend to them, but the APR was in excess of 80%. Marie’s mother Joan, who had excellent credit, offered to be a guarantor for them to help them obtain an affordable loan. They were able to find a rate of 39.9% on a two-year loan, costing them £232 each month.
Marie filled out an application form and her mother Joan added her own details. Within an hour, they had been contacted by an underwriter at the lender to talk through the loan. Following the call, the loan was approved and issued straightaway with Joan receiving the funds to her account, which she subsequently transferred to Marie. The couple booked the flights that evening and paid off the loan in full and on time, with no cost to Joan.
A guarantor loan allows people with no or a very low credit score to borrow if they have a guarantor who agrees to cover any unpaid monthly repayments. We have compiled statistics on how people are handling their guarantor loans.
We sat down with the UK’s biggest guarantor lender to learn where applications can fall down.
Finder’s tips to find the cheapest guarantor loans.
Find out who you can ask to be a guarantor for a personal loan. Compare providers and apply online.
Looking for a homeowner guarantor loan? Learn all you need to know about how they work, lending criteria and how to apply online.
Looking for a non-homeowner or tenant guarantor loan? Learn all you need to know about how they work, lending criteria and how to apply online.