The market for guarantor loans has grown significantly in the UK over the past couple of years. Particularly for younger people with impaired or inadequate credit ratings, a guarantor loan often represents the only opportunity to be able to borrow. George Banco has risen to prominence as a guarantor loan lender over the past few years and towards the end of 2017 was acquired by a fellow sub-prime lender, Non-Standard Finance PLC.
Who is George Banco?
The lender was established in 2014 and offers guarantor loans. This is a type of lending that requires a third party to stand as surety for a loan. It enables someone without a great credit rating to be able to borrow, thanks to the guarantor system. Guarantors are required to be over 18 and are usually homeowners with a good credit rating. In the years since it was established, George Banco has expanded considerably and has become the second most prominent provider in the guarantor loans market. When the company was acquired it had a loan book value of around £40 million and in the year up to 31 May 2017 it generated revenue of £9.3m.
George Banco is one of a large number of guarantor loan lenders that Solution Loans works with – it’s quick and simple to apply to all our lenders in one go, and at no cost!
Who acquired George Banco?
When the acquisition of George Banco was announced, the market value of Non-Standard Finance PLC increased as a result so this is clearly a positive move for the lender. Non-Standard Finance PLC was established in 2015 and has become the UK’s third-largest provider of home credit (i.e. loans where the repayments are collected at home), as well as other unsecured types of loans. George Banco will sit alongside another acquisition that the business has made – TrustTwo, which was acquired in 2015. TrustTwo targets younger borrowers who either have no credit history, or a difficult credit history, and aren’t particularly eligible as borrowers as a result.
What does the acquisition mean for the market?
The thriving guarantor loans market looks set to continue to grow with the consolidation of these businesses. Guarantor loans have become incredibly popular in the UK for a number of reasons:
They are unsecured so can be borrowed even where there is no asset (such as a home or a car) to secure the loan against
New lenders have made guarantor loans more attractive. Lenders recognising the need for this type of lending now offer low (or no) fees, as well as instant cash availability.
Guarantor loans offer slower repayment. While payday loans, for example, have short repayment terms that may suit some borrowers, spreading payments out over a longer period of time with a guarantor loan makes borrowing more affordable for many.
Parents and relatives can provide low risk assistance. Guarantor loans are popular with the younger generations currently struggling to obtain finance. Guarantor loans offer a way for parents and relatives to support a loan application at no financial cost (as long as the borrower keeps up the repayments).
A debt lifeline. For some people this is the only option when it comes to obtaining finance. Guarantor loans provide lenders with the reassurance they need to extend credit to certain borrowers. Without this some borrowers might not have access to finance at all.
There is no limit on what the finance can be used for. From helping to get a business off the ground to paying for emergency repairs, there is no requirement for guarantor loans to be used for a specific purpose.
What does the George Banco acquisition mean for borrowers?
It’s a sign that the market is continuing to develop and that more sophisticated products and options will likely be created. Non-Standard Finance PLC has said that it intends to expand its product ranges to meet demand from customers and to offer different types of borrowing that cater to non-standard borrowers.
“George Banco represents a transformative acquisition for the group, putting NSF into the clear number two position in the fast-growth guaranteed loans segment. Complementing our existing TrustTwo brand, George Banco provides us with real scale and an opportunity to grow even faster”
said John van Kuffeler, chief executive of Non-Standard Finance.
What obligations do guarantor loans place on the guarantor?
Guarantor loans offer a great opportunity for a borrower and are also attractive to lenders – but what about the guarantor? It’s always important for a guarantor to understand what might happen if the borrower doesn’t keep up essential repayments. Any repayments not made become the responsibility of the guarantor, as well as any applicable fees, charges or interest. Guarantors are often friends or family members – it’s important for the guarantor to trust that the borrower is going to make the repayments on time.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read more about Amanda Gillam