If you are a journalist or have an enquiry about Amigo Loans please contact Amigo's PR lady, Kelly, on 07799652418
Otherwise, take as much time as you need and have a read about us and how we work.
7 million people are currently unable to borrow from banks because of their credit score* but things weren't always this way. For hundreds of years borrowing was based on your reputation. Bank managers were a part of the local community, personal relationships counted.
In 1970 the first credit score was invented, it was the beginning of the end for community banking. Over time, relationships became less important, computers took over and pretty soon a number on your file was all that mattered. Customers with high numbers were good and customers with low numbers were no longer welcome.
* Seven million people are currently unable to access credit from traditional sources – Datamonitor -Non-standard Lending 2010: New Opportunities for Alternative Lenders (Report).
Computers are great at doing repetitive tasks, like calculating interest on your account or serving up this website 20,000 times a day, but they aren't great at making judgments on people's lives. Worse still, computers producing these credit scores aren't actually judging whether you can easily repay.
It makes sense - if you were a bank, wouldn't you want to focus on the most profitable customers? Credit scores are actually calculated on how much money the bank thinks it can make out of you.
So if you're more likely to be able to pay off a loan quickly (for example because you are starting your own small business) you get a lower score because the bank gets to make less money out of you.
We'd love to say this was our idea, that we've invented something new here, but we didn't. Guarantor loans have been around since Roman times. In the UK, Guarantor Mortgages have been around for some time and most university students rely on a guarantor when they rent their first flat.
In the third world the Microfinance movement, started by Nobel Prize winner Mohammed Yunis, relies on loans being guaranteed by groups. Guarantor based finance is a back to basics approach which is helping people all over the world achieve financial inclusion.
What we are doing here is important because it makes borrowing possible for millions of ordinary people who are being excluded by banks. Without us our customers would only have extortionate payday loans or illegal money lenders to turn to.
Amigo customers come in loads of different shapes and sizes. Young people, people who have been out of the UK for some time and micro business entrepreneurs are all very poorly rated by credit scores. What brings all of our customers together though is that they are trusted by their friends and family.
We believe everyone falls into one of these 4 boxes:
If you’re in box A:
you can borrow from a bank and you will repay. You don't need Amigo, you're likely to think we're expensive.
If you’re in box B:
you can borrow from a bank, but we don’t think you should be able to. Box B is the reason the credit crunch happened.
If you’re in box C:
the bank’s computer score has got you wrong. We estimate around 2m people in the UK fit in box C. All Amigo customers are in box C.
If you’re in box D:
you can't borrow from a bank or from us, in fact you shouldn't borrow from anyone right now. You might want to speak to the CCCS - your friends are telling you something, they know you best and borrowing is almost definitely not a good idea for you.
I know what you're thinking; why not just borrow directly from your friend? Lots of people do. We're not trying to change that but we know there’s a gap. 67% of Brits would turn to family member or friends if they were turned down for credit by the bank, but many wouldn’t be able to financially support their loved ones if they were asked, simply due to lack of cash available.
Surely a guarantor should be able to get a loan at a better rate? Some people do that too, but borrowing money yourself is very different to guaranteeing a loan. You have to manage the account yourself; make payments every month out of your own account; collect each payment from the borrower; the account is recorded on your credit file; applications, the loan balance and any late payments can affect your credit score. Most importantly, on an Amigo loan the borrower actually gets the chance to rebuild their credit rating. As payments are made on time, Amigo write back to all three UK credit reference agencies (Experian, Equifax and Call Credit) meaning that borrowers can eventually borrow on their own without help.
Like anything, it depends what you compare it to and how you use it. Amigo Loans have no fees at all and charge interest daily. This means you can use it just like a payday loan, except the APR is 1/100th of the APR of payday lenders APRs. (You did read that right, ONE HUNDREDTH).
Our loans are more expensive than bank loans (RBS and Natwest are currently charging 23.9% for £2,000 over 3 years) but unlike banks we charge no fees at all. Over 40% of our borrowers take advantage of this and choose to pay off their loan early, often meaning the actual amount of interest they pay is half the quoted APR.
We're working to bring our costs down and want to reduce our charges. We believe that one day we will be able to reduce to lower than the Credit Union rate of 26.8%.
Being guarantor for someone is a serious commitment. We go to great lengths to make sure no one ever goes in without fully understanding what is going on. First of all our contracts are really simple, we've cut them back to as few words as possible. Check one out here. Secondly we carry out a telephone interview with every guarantor where we run through their income and outgoings, make sure they are able to pay if the borrower doesn’t and lay out in plain English their obligations. To make sure the guarantor really is willing to pay we ask them to give us debit card details AND a direct debit to use if we need to. We send confirmation texts, letters and emails before the loan is paid out, and finally the loan is paid into the guarantor’s bank account not the borrowers so that they definitely know the loan has happened.
No one should be a guarantor unless they are happy to pay the loan if the borrower doesn't. Because people can judge their friends much better than a computer, and because borrowers don't generally want to let down friends who have done them a favour, late payments and defaults are rare. But occasionally they do happen - when a payment is missed we contact the borrower and the guarantor by phone, email and text message so we can sort it out as quickly as possible and understand what’s caused the missed payment… We don't charge for this.
Guarantors agree to paying any missed payments before a loan is paid out so if the payment is missed and the borrower doesn't pay within a few days we do take payment from the guarantor.
If a guarantor doesn't pay we collect in the same way as your bank would.
We never write back to a guarantor's credit file. Credit searches, the account status, late payments, even the link between the guarantor and the borrower are all hidden from credit reference agencies.
If a guarantor decides not to honour their commitment and we can't talk them round eventually we would pass the debt on to a debt collector.