A landlord analyses some aspects before granting you the keys to the rental home. He conducts a detailed assessment of the individual’s past rental history.  It reveals whether you were regular with the rental payments or not. If not, the landlord may desire an additional payment guarantee. It helps him get the reassurance of the rental costs. This is where the guarantor enters.

A guarantor is a renter’s acquaintance who shares an incredible credit score and income and owns a property. Homeownership grants the security of getting the payments timely. It is where the landlord signs off the tenancy agreement with the person.

However, only a few people own a property. Finding a homeowner for a rental agreement gets challenging. Even if you find one, he may deny the idea of acting as the guarantor. What would you do here?  You can provide the strength of the income or credit score to qualify. However, if you lack both, tenant guarantor loans may help.

What are tenant guarantor loans?

Tenant guarantor loans are for individual tenants seeking help with rental payments. A guarantor or a person may help with the payments, as well as having a stable income and credit history. He does not necessarily have to be a homeowner. The guarantor can be a fellow tenant with the potential to afford the payments.  He must reveal the affordability to afford his and the borrower’s part.

One may get up to £15000 with a tenant as a guarantor. However, you may get a lot with a homeowner as a guarantor. There is a bar on tenant guarantor loans as tenants change properties frequently.

So, the loan provider keeps the risk low by providing only up to an extent. Additionally, the interest rates remain less competitive than a homeowner guarantor loan. However, regular payments may help you keep the costs low.

7 Important considerations when using a non-homeowner guarantor loan

You only need a tenant guarantor if you lack a stable income and a good credit and rental payments score. Your guarantor needs to co-sign the agreement with you. This means that the borrower and the guarantor will be equally responsible for the payments.

Discuss the terms with the guarantor. If the loan fits each situation just right, you may proceed. Additionally, you may call off the loan agreement within 14 days if it does not fit your needs.  Here are other considerations that may help you decide better:

1) Eligibility of a guarantor

The eligibility criteria for a tenant loan with a guarantor may vary from lender to lender. Different loan providers have different risk appetites. Hence, the lending criteria may differ. Here are the general criteria for a guarantor to qualify:

Eligibility for a guarantor to qualify:

·         He must be a UK citizen of 18 years or more years

·         He must hold a regular income of above £12000/month

·         The person must hold a good credit score with responsible payments

·         He must possess valid identification proof

·         Should have reliable and authentic employment

·          The person must share the potential to afford his and the borrower’s rental payments (if necessary)

2) The possibility of changing the guarantor

Unless your agreement permits, the selected guarantor remains the same until the tenancy ends. Tenancy changes include rent increases and tenant changes (flat changes). The tenancy agreement must state the changes in detail. However, contact the landlord if you want to change the guarantor in the middle.  He will help you understand the complexity involved in the new agreement or the possibility.

3) The situations where a guarantor might help

Individuals earning over 2.5x of the annual rent, with a regular job and decent credit history, do not require a guarantor. For example, if the property’s rental price is £15000/ year, you must earn at least £37,500 annually. 

However, each landlord has different eligibility criteria for renter or guarantor. Likewise, he may have unique income criteria. Thus, before seeking non-homeowner guarantor loans from direct lenders nearby check whether you need to provide a guarantor. Here are some situations that mandate one to provide a guarantor:

·         You have no or little credit history

·         You do not earn or have earnings below the requirement

·         You cannot make basic rent payments

·         Are you a student and renting for the first time?

·         Moving to the UK from overseas

·         Do not own a home

4) Understand the responsibilities of a guarantor

You and the prospective guarantor should know about the guarantor’s responsibilities. It will help you as a borrower understand whether the fellow tenant can meet the requirements. Alternatively, it will help the tenant understand his responsibility as a guarantor. Likewise, he can decide whether to be the guarantor. Here are some responsibilities of a guarantor:

·         A guarantor must meet rent payments if the borrower cannot

·         They will be responsible for paying additional charges in the tenancy agreement

·         A guarantor must make minimal utility and council tax payments if the borrower cant

·         Under joint tenancy, the guarantor must pay the respective rent share

·         Breaching the agreement implies legal fees and impacts the credit score of both parties involved.

·         If the borrower has yet to pay the dues and the tenancy ends, the landlord may refuse to end the contract.

5) Absence of tenant guarantor or can’t have one

Individuals new to the country do not know any tenants or family members. It becomes difficult to secure a tenancy agreement in that case. Moreover, if the person himself lacks a suitable income, credit score or rental history, he can’t rent. Here, some landlords may demand a higher deposit. If you are a student, contact your respective university or student union.

Usually, they have a guarantor scheme or ad vice centre that may help you with your personal situation. Also, you can check private guarantor schemes. It typically includes a guarantor that a company provides. He analyses your situation and helps you with the tenancy agreement.  However, hiring a private guarantor requires you to pay for the services.

6) Timeline of a rent guarantor

A guarantee agreement signed by the persons involved is usually open-ended. This implies a guarantor may be liable for payments beyond the fixed tenancy period. This is because an open-ended tenancy agreement is vulnerable to changes. Alternatively, a closed-ended tenancy agreement is a fixed rental term agreement. It indicates the guarantor’s liability period from the beginning to the end.

7) Exceptions in the non-homeowner guarantor loan

Yes, you should know the exceptions in non-homeowner guarantor loans to avoid mishaps. Here are some exceptions:

·         A guarantor is not responsible for the expenses or responsibilities he was unaware of. Thus, grant him the opportunity to read the agreement and clear confusion.

·         If the loan agreement lacks proper drafting, the guarantor is not liable for the payments.

·         Renew the agreement if the guarantor’s liability extends over the due term. However, the landlord may eliminate the guarantor requirement if the tenant’s situation improves. If the tenant can repay the dues independently, he may end the guarantor agreement without renewing it.

Bottom line

If you lack a credit history, suitable income and UK residency, a guarantor is a must. The loan may help you get a fellow tenant as a guarantor. He does not need to be a homeowner to qualify. He must earn at least twice the annual rent income to support you.

He will help you get a suitable rental space by meeting tenancy requirements. The guarantor must be UK-based as it eases things. Next, he should meet the respective landlord’s eligibility criteria. Later, the guarantor will be responsible for the rental payments if you cannot pay until the rental term.