Often lenders won't provide a loan to someone unless another person (such as a parent, relative or friend) guarantees to make the payments if the borrower fails to do so. The person providing this guarantee is known as a guarantor. This form of lending is often called a "guarantor loan".
If you are required to make payments under a guarantor loan agreement but are now in financial difficulties contact the lender and explain your circumstances.
The Financial Conduct Authority (FCA) requires creditors to offer forbearance to vulnerable customers in financial difficulty. This may mean offering a holiday period or reduced payments to enable you to get back on your feet.
Financial Ombudsman Service
If the lender refuses to do so you can lodge a complaint with them; and ultimately pursue a complaint with the Financial Ombudsman Service.
You should also check whether the creditor has fulfilled all of its duties to you. Lenders are required to undertake an assessment of affordability which was proportionate – to determine if a prospective borrower would be able to repay their loan.
Since November 2015, the Financial Conduct Authority (the UK financial regulator) has required guarantor loan providers to carry out a similar affordability assessment on a prospective guarantor to ensure they would be able to make the loan repayments in the event they have to.
If the lender has failed to do this properly, you can make a complaint to them. If you remain unhappy after complaining to your lender you can pursue a complain to the Financial Ombudsman Service to try and reduce the outstanding balance (such as by removing interest and other charges). You can do this yourself online.
The Financial Ombudsman Service will look at the following issues:
- Did the lender complete reasonable and proportionate checks to satisfy itself that the borrower would be able to repay the loan in a sustainable way?
- If reasonable and proportionate checks were completed was a fair lending decision made?
- If reasonable and proportionate checks weren’t carried out, what would reasonable and proportionate checks more likely than not have shown?
- Did the lender obtain the guarantor’s properly informed consent to being a guarantor?
- Did the lender complete reasonable and proportionate checks to satisfy itself that the guarantor would be able to repay the loan in the event the borrower didn’t?
- If reasonable and proportionate checks were completed was a fair lending decision made?
- If reasonable and proportionate checks weren’t carried out, what would reasonable and proportionate checks more likely than not have shown?
- Did the lender act unfairly or unreasonably in some other way?