If you have applied for a guarantor loan, but then get declined due to the guarantor you have chosen for the loan application, you may be wondering why this has happened, and what it means when applying for future guarantor loans.
Your guarantor may have been declined for a number of different reasons, however, all of these will most likely point to the fact that they have not met the eligibility criteria lenders require for guarantors, and therefore have not shown sufficient proof that they are able to afford the loan should they be required to take over repayments.
But what specific reasons can a guarantor be declined for? And can you choose another guarantor for a loan application if the first one was rejected? Lending Expert explores some frequently asked questions surrounding this topic, helping you to understand why a guarantor would be declined, and what you can do about it.
Can a Guarantor Be Declined?
Yes, a guarantor can be declined if they have not met the lender’s eligibility criteria. This is why it’s important to understand all of the criteria for a guarantor loan before applying, checking that both the main borrower and the guarantor meet all of the eligibility requirements before applying for the loan.
Guarantors are used as an assurance for lenders, helping them to feel more secure that should the loan be approved it will be paid back – if not by the main borrower then by the guarantor. Therefore, guarantors will need to demonstrate that they can afford the loan, and are reliable to lend to, otherwise they will be rejected.
What Are the Eligibility Criteria for a Guarantor?
The eligibility criteria for a guarantor may vary depending on the loan and the lender providing it. However, some of the main requirements most guarantors will be expected to meet include the following:
- Must be 25 years old or over
- Must be a UK resident
- Must have a good credit history
- Must not be bankrupt
- Must hold a UK bank account
- Must be able to show that they can afford the loan if the main borrower defaults
The guarantor may also need to be a homeowner, and be able to prove this. However, homeowner status is not always necessary, and will depend upon the lender and the loan you are applying for.
Will My Guarantor Be Credit Checked?
Yes, lenders will check the credit score of guarantors to see whether this meets their eligibility criteria. Credit scores are typically used as evidence of the guarantor’s ability to keep up with repayments. Many lenders will often require guarantors to have a good credit history in order to be eligible.
However, while the guarantor’s credit typically needs to meet a certain standard, the main borrower may be eligible even with bad credit.
Guarantor loans are often used by people who have bad credit ratings, using a guarantor’s credit rating and affordability to help ensure the lender that the loan will be paid off.
Can I Choose Another Guarantor if My First One Was Rejected?
Yes, you can choose another guarantor for your loan application, provided that you were rejected because of the guarantor not meeting the lender’s requirements.
If the loan was rejected for other reasons (e.g. the main borrower does not meet their own set of eligibility criteria), the issue with this application cannot be resolved by switching guarantors.
However, whether or not you will be able to change your guarantor once rejected will depend on the lender you’re applying with. A lot of the time, lenders may give applicants a maximum period of 45 days to find a new guarantor without having to restart their application.
When your guarantor is rejected, it’s best to check with your lender regarding the options available.