As a guarantor, you will be aware that if the original lender is unable to make the payments towards the loan or debt then you will become liable for those payments. This article answers the question, what is a guarantor and how debts could affect them.
What is a guarantor?
A guarantor is someone who agrees to be responsible for any loan you take out. If you become a guarantor you will be contractually liable for someone else’s debt if they can not pay it. As a guarantor, you will have to sign a document with a witness present to say that you are willing to be responsible for the other person’s loan or debt repayments. Common products that may require a guarantor include tenancy agreements, mortgages and loans.
Who can be a guarantor?
Anyone can become a guarantor. However, this person should be some you trust, such as a parent, sister, brother, uncle or aunt. This person should also be willing to cover repayments if you can not do so. A guarantor must be over 21 years old, with a good credit history and financial stability.
Will being a guarantor affect me?
When someone agrees to be a guarantor they are agreeing to take joint responsibility for the costs of the agreement, which could be a tenancy agreement. Unless the other person also agreed to guarantee the agreement then it is not their liability. The guarantor agreement that you have signed will have the details of the extent of your liability, it is usual to be the same length of time as any other agreement and may also cover any costs for damages.
Without seeing the terms of the agreement it would not be possible to give an answer about when, or how, this guarantee can end. You may need to seek legal advice rather than debt advice. If this is causing difficulty paying other credit commitments, or impacting on the ability to pay for essential expenditure in the household, then it could be that a debt adviser can prepare a financial statement for him and look at the options for dealing with this and any other debts.
Does being a guarantor affect my credit?
If the person borrowing the money keeps up with the repayments, then this should not affect your credit. However, if they default on their repayments or fail to make payments, this will then be added to your credit report.
Does being a guarantor affect my mortgage?
Yes, it could affect your future mortgage applications. Mortgage companies look at all areas of your financial history. So, if you as a guarantor had to pay someone else’s debts this will reflect badly on your mortgage application.