Published on January 22nd, 2019 | by Chris Holmes0
Can’t Pay Guarantor Loan
Did you take a guarantor loan to pay the off bills, buy a car or cover for a financial emergency and are now having difficulty in repaying it?
Many of us have been there!
While the inability to pay any loan can cause huge problems, when you can’t pay a guarantor loan, you are putting yourself and the friend or family member who helped you secure the loan in trouble.
If your struggling with your Amigo Guarantor Loan – Please see our article here.
Guarantor Loans – What Are They Anyway?
Guarantor loans are a type of loan specifically designed for people with little or poor credit history and who cannot secure other types of loans for any reason.
In a guarantor loan, a second person takes “responsibility” for paying off the loan if the person taking the loan could not pay. The guarantor lender can reach out to the guarantor, even if you have missed only one instalment.
The interest rate on guarantor loans is generally higher than other types of loans due to the level of risk the lender has (i.e. It might not be repaid!)
How Much Can You Get Through a Guarantor Loan?
The maximum amount of a guarantor loan depends on your financial circumstances as well as your guarantor’s income and assets. The lender individually assesses you and your guarantor’s financial situation to determine the amount of loan that can be given – both of you should be able to pay the amount individually.
In the UK, the maximum loan you can borrow by providing a guarantor is generally around £15,000. However, these amounts do vary between lenders.
General Criteria for Guarantor Loans
In general, the guarantor has to fulfil the following conditions in order to be eligible to be a guarantor:
- Aged 21 to 75 years old
- Have a good credit history
- Able to demonstrate the ability to repay the loan – this may require showing proof of income, bank statements and/or property documents.
- Many lenders require the guarantor to own a property, although not all lenders have this condition.
- Should not be financially dependent on you or have shared finances.
- The guarantor should not be your spouse or partner.
What Happens If You Can’t Pay a Guarantor Loan?
As per the conditions of a guarantor loan, the lender has the right to contact the guarantor if the borrower misses a payment. The guarantor is legally responsible to pay all the missed instalments and any interest/fees that are applicable.
The lenders tend to give some time to the borrower to catch up with the payments; however, if you continue to miss payments, you will be listed as a defaulter and the lender gets in touch with the guarantor.
What If the Guarantor Is Unable to Pay?
While the situation is less likely to occur, as most lenders
perform a financial assessment to determine the guarantor’s ability to pay the
loan, it may happen that a guarantor is unable to make the payment due to some
unexpected loss of finances or some emergency.
What If the Guarantor Refuses to Pay?
If the guarantor can afford to pay the loan but refuses to pay, it is considered to be breaking the terms of the credit agreement. As a result, the guarantor will face repercussions that include receiving official notices, a negative impact on credit score and legal action.
The lender may transfer tbe debt to a debt collecting agency and put a claim in the guarantor’s property or assets.
Issuance of a warning letter is usually the first step, and if the debt is not cleared in the given time period, the lender has the right to take legal action.
Whatever the reasons are, the failure to pay a guarantor loan is likely to leave a black mark on both the borrower and the guarantor’s credit report; just like the joint debt.