Can I Stop Being Someone’s Guarantor?

Due to your own personal circumstances or your relationship with the borrower, you may no longer wish to be their guarantor. Since the loan period can be as long as seven years, you may not want to have the responsibility of being a guarantor for so long. However, once both parties have signed the loan agreement and the guarantor loan has been funded, the guarantor cannot get out of the agreement so easily.

This is because the loan decision is based heavily on the guarantor’s involvement. It is common that applicants for guarantor loans have a less than perfect credit history, so they rely on the guarantor’s credibility in order to secure a loan. Therefore, during the application process, the guarantor’s details including their employment, credit history and affordability are assessed and the loan and how much it is for, is granted on this basis.

For this reason, the guarantor lenders we feature tend to follow the rule that once the guarantor has signed the documentation and the loan has gone through, you cannot exit the agreement.

The ways to get out of a guarantor contract 

The only valid way to get out of being a guarantor is for the loan term to end. Most of our lenders allow you to repay your loan early and it is usually much cheaper to do so – as you only pay the daily interest for the time that the loan has been open for. So if you decide to repay in full, perhaps on the borrower’s behalf or you encourage them to repay early, the loan will be closed and you will be out of the agreement.

Furthermore, if the guarantor is deceased, they will no longer have the financial responsibility. However, the debt can be passed onto their spouse or the lender can have a claim on their estate in order to recuperate their funds. In these circumstances, it is recommended to speak to a solicitor for advice.

Can my guarantor be replaced? 

Some borrowers may think it is as simple as replacing the guarantor with another. Unfortunately, the majority of guarantor lenders do not allow you to replace your guarantor with a different one.

The reason for this is a replacement guarantor would have different credentials to the original guarantor and this would lead to different terms of the loan including the interest rate, how much you can borrow and how long for.

Only during the application stage may you replace guarantors as you are trying to find the one most suitable for your loan – but at this point, nothing would have been signed yet.

The two-week cooling off period  

As being a guarantor is a big responsibility, the lender will give you a two-week cooling off period once the loan has been successfully funded. As soon as the loan is approved, the funds will go directly to the guarantor’s debit account and they will have two weeks to decide whether they want to pursue the loan, in which case they can pass on the monies to the borrower, or they can decide to withdraw, sending the money back to the lender with no added fees.

Make sure you have a good relationship with the borrower 

It is important to have a good relationship with the main borrower as being a guarantor means that you might have to make repayments on their behalf, for several years.

In our guide ‘who could be my guarantor,’ we explain that the guarantor and borrower should have a close relationship such as a family member or friend. The guarantor needs to understand what is expected of them and have a good idea of the borrower’s financial situation and likelihood that they will be required to make payments.

You also need to think about whether the borrower is someone that you will still be speaking to regularly during the loan duration. If the loan lasts for five years, you need to consider whether you will still be in touch because you could be called upon for repayment at any point. You can always consider applying for a guarantor loan with a shorter term – taking one out for just a year, rather than the maximum of seven.

Finally, it is worth speaking regularly during the loan term and discussing how the repayments are going, just so there are no surprises or mishaps.