Why wasn’t my guarantor approved?
If you have recently made an application for a guarantor loan, applying as the main borrower and nominated a guarantor, you may have been left scratching your head if your application wasn’t accepted due to the guarantor you put forward. It may have also left you confused as to whether or not this has impacted your ability to apply for this type of loan in the future – but that needn’t be the case.
There can be a variety of reasons that attribute to a direct lender deciding to decline the guarantor you put forward in your application. We take a closer look at the main factors.
Basic criteria not met
One of the most common reasons a guarantor is declined is due to not meeting the standard eligibility criteria that had been stated by the guarantor lender. This is why you should always make sure that you have thoroughly checked the requirements for the guarantor applicant before making your application. In terms of the kind of criteria lenders will usually look for in a guarantor, it tends to be the following:
- Being a homeowner
- Having a strong credit rating
- Being a UK resident
- Being over a certain age (this is often stipulated as being over 25) but can depend on the lender.
The guarantor wasn’t a homeowner
If the guarantor does not own a property, this could well be the reason as to why the application was declined. Most guarantor lenders require the guarantor to have homeowner status as a way of determining their creditworthiness. This is important, as the main reason why your application is approved or declined is based upon the creditworthiness of your guarantor. It helps to mitigate the risk of lending to you the main borrower, who may not necessarily have a perfect track record of keeping up with repayments.
Lack of income
Most guarantor lenders will also need the nominated guarantor in the loan application to be in current employment, alongside the main borrower. It is possible for this to be either on a full-time or part-time basis, as long as both parties are earning over £500 a month.
Employment is another indicator of a guarantor’s creditworthiness, as this provides evidence that they are in a better financial position than the main borrower. This is key, as having enough disposable income to pay off the loan should the main applicant is unable to do so is fundamental to whether or not the application is approved or declined.
A weak credit score
You will find that whilst different guarantor lenders have a range of criteria for applicants, one thing the majority will be looking for in their criteria is a strong credit rating for your nominated guarantor. A guarantor having a strong credit score is of far more importance than if you do, as the guarantor is the person who is legally responsible to make payments on your behalf if you end up defaulting on payments at a later date.
But what can constitute a weak credit score? Most lenders will consider multiple CCJs on file, bankruptcy or multiple missed repayments for credit taken out as all signs of someone who is not good at dealing with credit. This will greatly reduce the chance of the application being accepted.
