Amigo operated on a guarantor loan model. This means that if you borrowed money from Amigo , you would need to find someone who would agree to be your guarantor. The guarantor would be responsible for making your loan repayments if you were unable to do so.
Here is a simplified overview of how Amigo worked:
Borrower applies for a loan: The borrower would apply for a loan on the Amigo website or by phone. They would need to provide details about their income, expenses, and credit history.
Guarantor agrees to the terms: The borrower would then need to find a guarantor who agrees to the terms of the loan. The guarantor would need to be a UK resident with a good credit score.
Amigo approves the loan: If the borrower and guarantor are approved, Amigo would pay out the loan amount to the borrower.
Borrower makes repayments: The borrower would make monthly repayments to Amigo , which would be automatically taken from their bank account.
Guarantor is on the hook for missed payments: If the borrower missed a payment, Amigo would first contact the borrower to try to get them to catch up on their payments. If the borrower was still unable to make payments, Amigo would then contact the guarantor.
As a result of these findings, Amigo was forced to pay out millions of pounds in compensation to borrowers. The FCA also took steps to restrict Amigo’ ability to lend money.
In May 2022, Amigo entered into a Scheme of Arrangement with its creditors. This scheme will see the company’s loans transferred to a new lender, while Amigo is wound down.
What happens to existing Amigo customers
Existing Amigo Loans customers will not be affected by the wind-down of the business. They will continue to make their repayments to Amigo as usual, and their loans will be transferred to the new lender under the Scheme of Arrangement.
If you are an Amigo guarantor, you will need to continue to make your monthly payments to Amigo until your loan is transferred to the new lender. The new lender will then contact you to discuss your ongoing obligations.
Aneta is a staff writer covering money content, including personal finances, savings accounts, taxes, loans, mortgages, credit cards, interest rates and insurances for FintechZoom. Contact: [email protected].