Guarantor Loan Debt Management Advice

 

People reading this page usually want to achieve two things:

 

1. Deal with their own debts

2. Protect their guarantor

 

If you share these priorities, this article explains potential solutions to manage your debt problem while avoiding causing problems for your guarantor.

 

Which of the following statements applies to you?

 

1. You have a guarantor loan and other types of debts

2. You only have guarantor loan debt

3. You’re a guarantor being chased for payment

 

Please continue to the relevant section below…

 

1 - You Have a Guarantor Loan and Other Types of Debts

 

If you have a guarantor loan and other types of debts (like credit cards for example) we suggest that you contact us. There’s a good chance that we can help if you can afford to make a reduced regular payment.

 

We have customers who have been able to enter a debt management plan, continue repaying their guarantor loan(s) in full, and protect their guarantor from debt collection action.

 

Success is possible even if you’ve already fallen into arrears.

 

For further information about how debt management could help you, see the “Debt Management Plan for a Borrower” section below.

 

We also recommend that you read the sections below about borrower and guarantor complaints.

 

2 - Your Only Debts are Guarantor Loans

 

If all of your debt is made up of guarantor loans, the situation becomes trickier.

 

A debt management solution could protect you but it will not protect your guarantor.

 

For example, if you reduce your monthly payment the lender will usually demand that the difference is paid by your guarantor.

 

There are four possible solutions to this problem, but each solution requires your guarantor to take action as well as you:

 

1. You enter a debt solution and the guarantor complains

2. You complain and the guarantor enters a debt solution

3. You both enter a debt solution

4. You both make complaints

 

We explain more about making complaints to guarantor lenders below. They are losing many cases that reach the Financial Ombudsman Service because of widespread failures in their lending processes.

 

We also explain below about the debt solutions that both borrowers and their guarantors can use.

 

3 - You’re a Guarantor Being Chased for Payment

 

Debt Solutions and Guarantor Loans

 

A range of debt solutions exist in the UK that can help to manage and clear your debts.

 

These debt management solutions can be used by borrowers and also by their guarantors.

 

We explain more about each of these debt solutions below. Please note there is a separate section for residents of Scotland where a different set of debt solutions operate.

 

Debt Management Plan for a Borrower

 

In a debt management plan you pay what you can afford each month. This is a flexible debt solution that continues until your debts are cleared in full.

 

It’s normal to include all of your debts in a debt management plan, but this isn’t necessarily compulsory if it’s in your best interests to leave one out. More formal types of debt solutions demand the inclusion of all qualifying debts.

 

Each creditor is offered a reduced monthly payment based on how much you can afford to pay.

 

We’ve helped some customers who have excluded their guarantor loan from their debt management plan. They manage their other creditors via a reduced payment into the DMP, which frees up enough money to carry on paying the guarantor loan in full.

 

This type of exclusion is accompanied by full disclosure to the other included creditors. The included creditors could deem this exclusion unreasonable and reject the debt management plan on that basis, but we haven’t seen this happen much in practice.

 

In reality we’ve found that guarantor loan exclusion from a DMP often doesn’t affect the willingness of the included creditors to accept the plan. Once the guarantor loan has been fully repaid there is usually much more money available to clear the other debts faster.

 

We have also identified situations where the full guarantor loan repayment is actually affordable without having to exclude it from a DMP. Debt management plans pay creditors on a “pro rata” basis, meaning that larger debts receive a larger share of the monthly payment.

 

Guarantor loans tend to be large so they also tend to qualify for a large percentage of a DMP payment. We’ve assisted customers where the guarantor loan pro rata share is sufficient to cover the full contractual repayment amount (and therefore protects the guarantor because there are no new arrears).

 

Contact us to find out whether a debt management plan could help you manage your debts and protect your guarantor. This can only work if you can afford to pay into a DMP and you have other types of debt as well.

 

You can enter a DMP on your own or jointly with your spouse or partner.

 

You should also consider complaint options (see below).

 

Debt Management Plan for a Guarantor

 

IVA for a Borrower

 

IVA for a Guarantor

 

Entering an IVA can deal with all of your debt liabilities including loans that you have guaranteed.

 

You should also consider complaint options (see below).

 

Bankruptcy for a Borrower

 

Bankruptcy for a Guarantor

Debt Relief Order for a Borrower

 

Debt Relief Order for a Guarantor

 

A DRO can deal with all of your debt liabilities including loans that you have guaranteed.

 

You should also consider complaint options (see below).

 

Scottish Debt Solutions

 

Scotland has a different range of different debt solutions but the challenges remain the same.

 

Protected Trust Deed: See comments regarding an IVA (above). The payment term of a trust deed is a minimum of four years.

 

Bankruptcy (Scotland): See comments regarding bankruptcy (above). The relevant payment term is four years (rather than three years in the rest of the UK).

 

Debt Arrangement Scheme (DAS): This works like a debt management plan (see above). However, you must include all debts and your guarantor will be at risk if you default on the contractual repayments.

 

In all instances you should also consider complaint options (see below).

 

Borrower Complaints

 

Before providing you with a loan a lender should check you’ll be able to afford the repayments. This is their regulatory obligation.

 

If you were given a loan but the lender didn’t conduct proper affordability checks, you may have grounds to complain.

 

When you were given your guarantor loan do you believe you could afford to do all of the following?

 

• Repay the new loan

• Repay your other debts

• Pay your household bills

• Pay your other expenses

• Not need further credit

 

If your answer is “no” we advise you to seriously consider making an affordability complaint.

 

Your complaint should initially be made to the lender.

 

If they accept your complaint, the lender may offer assistance such as a lower monthly payment or writing-off the interest.

 

If the lender rejects your complaint you can escalate it to the Financial Ombudsman Service.

 

The Ombudsman is currently “upholding” (agreeing with) the vast majority of complaints made by borrowers against guarantor lenders such as Amigo.

 

We’re not a claims company and we cannot provide you with direct advice about how to make a lender complaint.

 

The Debt Camel website provides an excellent self-help guarantor loan complaint guide including template letters you can use. A local advice agency (like Citizens Advice) may be able to assist you.

 

Guarantor Complaints

 

Guarantors have several potential grounds for complaint.

 

The lender should have checked that you could afford to repay the loan if the borrower defaulted.

 

When you agreed to act as guarantor for the loan do you believe you could genuinely afford to do all of the following?

 

• Repay the loan if the borrower defaulted

• Repay your other debts

• Pay your household bills

• Pay your other expenses

• Not need further credit

 

If the answer is “no” we advise you to seriously consider making an affordability complaint. We provide information about how to do this in the “Borrower Complaints” section above.

 

Other potential grounds for making a complaint include:

 

• You were pressured into becoming guarantor

• The borrower held a position of authority over you

• You were coerced as part of an abusive relationship

• The loan was increased without your permission

 

A complaint should initially be made to the lender.

 

If they accept your complaint, the lender may offer assistance such as removing you from being the guarantor of the loan.

 

If the lender rejects your complaint you can take the matter to the Financial Ombudsman Service.

 

The Ombudsman is currently “upholding” (agreeing with) the vast majority of complaints made against guarantor lenders like Amigo. One possible outcome is that they force the lender to remove you from being the guarantor of the loan.

 

We’re not a claims company and we cannot provide you with direct advice about how to make a lender complaint.

 

The Debt Camel website provides an excellent self-help complaints guide for guarantors. A local advice agency (like Citizens Advice) may be able to assist you.

 

About Guarantor Loans

 

A guarantor loan is a specialist type of borrowing promoted by Amigo and other lenders.

 

They’re often used for the high risk activity of debt consolidation.

 

Your guarantor is a party to the credit agreement and is committed to repaying the debt if you default. These loans are usually provided on an unsecured basis.

 

Secured guarantor loans are also available. If your guarantor used their home as security for your loan, ensure that they do not hesitate to get direct professional advice in the event that you default on your loan repayments. Any failure or delay in getting expert advice could ultimately result in the loss of their home.

 

Compared to other types of credit, guarantor loans are especially risky for debtors.

 

The major issue is the risk to your relationship with the guarantor; usually a relative or friend.

 

If you can’t pay, the lender’s demands of your guarantor are likely to cause conflict, hurt, and guilt.

 

The loans are often large and are usually lent at high interest rates. These factors combined usually mean that the monthly repayment is high and the risk of default is greater.

 

They’re often long loans. Repayment terms of between one and seven years are common and the borrower usually has an imperfect credit history. The combination of these factors also results in a greater risk of default.

 

At the time of writing you should be able to get a payment break if you have been financially affected by Covid-19.

 

Firms That Provide Guarantor Loans

 

The UK market is dominated by Amigo but many other lenders also operate:

 

• 1Plus1

• Amigo

• Bamboo

• Buddy Loans

• George Banco

• Guarantor My Loan

• MASA Loans

• SUCO Loans

• Talk Loans

• TFS Loans

• Trusttwo

• UK Credit

 

Getting Debt Advice

 

Please contact us for debt management advice.

 

Our experienced advisers have helped many enquirers deal with guarantor loan problems.

 

If you have multiple debts and can afford to make a reduced monthly payment, a debt management plan may meet your needs and protect your guarantor.

 

We help customers (by telephone and email) in all parts of the UK from our offices based near Cardiff. You can call us on 02920 492661 or 0800 0437222.

 

 

Author: Andrew Graveson

Qualified Debt Adviser & Bright Oak’s Founder

 

Page Last Updated: 13/07/2020

 

 

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