Guarantor lending 'as damaging' as payday loans, warns charity

[havinastella]

So-called guarantor loans have the potential to be "just as damaging" for borrowers as payday loans, Citizens Advice is warning.

The loans involve friends and relatives being asked to pay off the debt, if the original borrower fails to do so.

But many such guarantors are unaware they are signing up for large debts, said Citizens Advice.

The loans - which carry interest rates of up to 46% a year - are aimed at people with poor credit histories.

It is thought that more than 50,000 people a year take out such loans, which can be repaid over periods as long as five years.

The family members or friends who guarantee the loans can be legitimately pursued by debt collectors, even in cases where the borrower has died.

 

http://www.bbc.co.uk/news/business-33555764

[honeybee13]

I'm not surprised about that, HAS. I suspect a lot of people don't realise what being a guarantor can lead to and I don't think it should be advertised as an easy solution.

 

HB

[sillygirl1]

Lots of them are advertised as a good thing, Sunny and Borro are touting their advantage of having somebody guarantee that they will get a repayment on time. I know there are others but I can't think of their names offhand. All you need to do is watch daytime tv on Channel 5 and they will crop up.

[citizenB]

There is another one that is quite "in your face" at the moment.. Amigo Loans.

 

This is the quickest way to destroy a family/friendship.

[Mr.P]

Those that (think that) they need to use one of these 'lenders' will generally have a poor credit record. I would point blank refuse to stand as a guarantor and insist that they look at a credit union instead.

 

The one I belong to offers unsecured loans with no guarantor needed for up to £5,000 with an APR of only 12.7%. They recently offered an introductory APR for first time borrowers of just 6.4%. Puts the 49.9% rate that these loan sharks charge in to perspective !