Putting Guarantor Loans into an IVA

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Guarantor loans add to the complexity of dealing with debt. In this article we explain what happens if you use the IVA debt solution. We compare how other debt management solutions could tackle guarantor loan debts. You’ll also find information about complaint options to address unaffordable lending.


Because these loans are so complex, getting expert debt advice is vital. You may feel trapped, but an expert adviser could identify a solution you’ve missed. For confidential personal debt advice, please get in touch.


About Guarantor Loans


These loans tend to be borrowed by people with imperfect credit scores. The amounts lent are often large and the interest rate is typically high. These are all signs that this type of lending is very risky. The combination of risk factors ultimately results in many people struggling to make their repayments.


Because this lending is so risky, the lender requires a guarantor. This person becomes responsible for making the repayments if the borrower defaults. This provides the lender with additional security and additional confidence that the loan will be repaid. The guarantor is typically a family member or a friend. Parents and other older relatives often agree to guarantee loans for younger borrowers.


The market leader in the UK is Amigo. Other notable brands include George Banco and UK Credit. We provide an extended list of the UK’s guarantor lenders at the bottom of this page. Guarantor loans may be provided on an unsecured or secured basis. Most loans are issued on an unsecured basis, but sometimes the guarantor uses their home as security. This is incredibly risky; continued default on the repayments could lead to the loss of their house.


Can You Use an IVA?


You can enter an IVA if you have a guarantor loan. An unsecured guarantor loan is treated exactly the same as any other type of qualifying debt. The account is added to your IVA creditor list along with all your other qualifying debts.


The guarantor lender can vote to accept, reject, or to modify your IVA proposal. They’ll receive some level of payment towards your account from the IVA. You’ll have no further liability to repay the debt once your IVA is completed, even if the loan wasn’t repaid in full.


Does Your IVA Protect the Guarantor?


The guarantor is not protected by your IVA. They’ve agreed to make the repayments on the loan if you don’t. The lender won’t receive the full monthly payment via your IVA, so they’ll demand that the guarantor pays it instead. If they don’t pay, the lender has options to use legal action to recover the money owed by the guarantor. Sadly, your IVA provides zero protection to your guarantor.


Can You Leave A Guarantor Loan Out of Your IVA?


It is not possible to leave a guarantor loan out of your IVA. The legal position is that you must include all qualifying debts. Even if you fail to disclose the loan to your IVA provider, debts owed to firms like Amigo are legally included within the IVA anyway.


It’s also not permissible to keep paying your guarantor loan directly during your IVA. Continued direct loan repayment isn’t a viable option to protect your guarantor.


Alternative 1 - Bankruptcy or Debt Relief Order


Guarantor loans are treated similarly if you become bankrupt or enter a DRO. In both cases you’ll be provided with protection from the lender, but your guarantor will not. The lender will seek repayment from the guarantor instead of you. You cannot choose to exclude a guarantor loan from your bankruptcy or debt relief order. You also cannot continue repaying the loan directly.


Alternative 2 – Debt Management Plan


A debt management plan (DMP) could offer more potential to protect your guarantor. This is potentially a much more flexible type of debt solution. That flexibility can create opportunities to manage a guarantor loan and deal with your other debts effectively.


This is an especially complex area of debt advice. An in-depth analysis of your debts, income, and expenditure is required to spot any potential opportunities. Our advice team has significant experience in this area. They’ve helped customers to enter debt management plans without exposing the guarantor to payment demands. This has been successfully accomplished with Amigo, George Banco, and UK Credit loans. To check whether this debt management solution could work for you, please get in touch today.


Alternative 3 - Affordability Complaints


Before providing a loan, lenders must check you can afford the repayments. Responsible lending is a regulatory obligation for guarantor lenders. If you were lent money without proper checks being made, you have grounds to make a complaint to the lender. Responsible lenders should check you can afford the loan repayment after paying your bills, general expenses, and any other debts you had at the time.


If the lender accepts your complaint, they should offer assistance. This could include a reduced monthly payment or a write-off of interest. Either of these outcomes could help to protect your guarantor.


If the lender rejects your complaint, you can take the complaint to the Financial Ombudsman. This is an impartial and official service to resolve complaints between financial firms and their customers. In their most recent complaint statistics, it’s apparent that guarantor lenders like Amigo have struggled to prove responsible lending. The Ombudsman upheld 90% of guarantor loan complaints. Borrowers can find further information about affordability complaints (including template letters) on the Debt Camel website.


Information for Guarantors


You have legally agreed to repay the loan if the borrower defaults. This continues to be the case if the borrower enters an insolvency process or debt management solution.


If you cannot afford the repayments, you should promptly get debt advice. A debt adviser will identify ways to manage the debt and protect yourself from legal action.


You could also investigate complaint options (see “Affordability Complaints” above). The lender should also have checked that you could afford the repayments if the borrower defaulted. If they did not make reasonable checks, you could demand that they remove you as the guarantor.


Some other possible grounds for guarantor complaints include:


• The loan was increased without your consent.

• You were pressured into acting as guarantor.

• You were coerced by an abusive relationship.

• The borrower holds a position of power over you.


If the lender rejects your complaint, or you’re unhappy with the outcome they propose, take the matter to the Financial Ombudsman Service. They can intervene to force the lender to take action if you’ve been treated unfairly. Guarantors can find further information about complaint options (including template letters) on the Debt Camel website.


UK Guarantor Lenders


You may be unsure whether you have a normal loan or a guarantor loan. If you don’t have the paperwork, call the lender to confirm the loan’s status. You can also call the lender to confirm whether you’re the guarantor on a particular loan.


The following firms provide guarantor loans within the UK market:


• Amigo

• George Banco

• UK Credit

• 1Plus1

• Bamboo

• Buddy Loans

• Guarantor My Loan

• MASA Loans

• SUCO Loans

• Talk Loans

• TFS Loans

• Trusttwo



Author: Andrew Graveson

Qualified Debt Adviser & IVA-Guide.co.uk Founder


Page Last Updated: 23/04/2020



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