It’s a big decision to become someone’s guarantor, and one that shouldn’t be taken lightly. As you’re essentially vouching for that individual, picking up any payments they may miss and linking yourself financially to the lender.
It’s worth keeping in mind that, as part of this decision, once you have become a guarantor you cannot stop being one. As you are part of the agreement, and the guarantee that the amount will be paid back, there is no way for you to be removed from the agreement while any money is still owed.
Can you change who is the guarantor?
As with stopping being a guarantor, you can’t be replaced as one either. It’s not possible to change a guarantor as the person originally included in the loan agreement is the person who has guaranteed that the loan will be paid. Keep this in mind when agreeing to be a guarantor, as your own financial situation will need to be secure, plus your relationship with the person you are guaranteeing could be negatively affected, and with no way to change the guarantor it could damage it further.
Can I have more than one person as a Guarantor?
The idea of having more than one guarantor may sound appealing, for both the borrower and the guarantors. It offers the chance to spread the burden of picking up any payments across more than one source, both lessening the amount each would have to contribute and increasing the chances of a payment being met when the borrower can’t.
Unfortunately, this is generally not allowed and lenders will only accept one person as the guarantor for a loan. There can be exceptions, for instance two guarantors may be allowed for a tenant loan, but generally you’ll have to stick to one guarantor.
There must be a way out of being a Guarantor?
This makes it sound like there’s no way at all to get out of being a guarantor, and that’s not entirely true. You can stop being a guarantor before the end of an agreed term if the borrower pays off the full amount early or you, as the guarantor, pay off the remaining amount early. This would end the agreement and you’d no longer be a guarantor. There may be fees for paying off an agreement early though, so keep an eye out for that if it’s something you’re considering, although they may still be less than any remaining interest.
What happens if my Guarantor dies?
An exception to the rule can occur when the worst happens, however. If a guarantor were to unfortunately pass away, then there is a chance that a lender will allow them to be replaced. Each lender has different rules in this regard and it’s worth checking with them to find out the best course of action.
Those that do allow a guarantor to change if there is a death will usually require the new guarantor to be a spouse of the deceased.
Being a guarantor is a big responsibility, and is one that should not be taken lightly. Spend some time learning who can be a guarantor and about how being a guarantor works before agreeing to be the guarantor for someone’s loan.
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Other pages in this section
- What happens if a Guarantor cannot pay
- Who can be a guarantor
- How can being a Guarantor affect your credit rating?