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What Happens If My Guarantor Cannot Pay My Loan?

What Happens If My Guarantor Cannot Pay My Loan?

The very nature of a guarantor loan, is having someone you know to guarantee the loan.

A guarantor loan is a loan where the borrower has someone they know sign as a guarantor, which means if the borrower fails to make the loan payments, for whatever reason, the guarantor will pay the loan payments.

This form of lending has many benefits to borrowers, one being that even with bad credit or no credit, they can be approved for a loan.

Guarantor loans are based on affordability, and once again, the fact there is a guarantor.

But what happens if the borrower cannot pay the monthly payments?

If this were to occur, the lender would be in contact with the guarantor and ask them to pay the payments.

This is what the guarantor agreed to when the loan was granted.

However, what happens if the guarantor does not pay the payments if the borrower defaults on the loan?

There may be two (2) reasons why a guarantor may not pay the payments in a situation where the borrower fails to pay the payments:

* The guarantor cannot afford to pay the payments

* The guarantor refuses to pay the payments

The outcome in both these situations, as we will see is the same, however, they can be two very different situations.

When a guarantor loan is underwritten and approved, both parties, the borrower and the guarantor are reviewed and looked at for affordability, and also the guarantor’s credit.

So the lender has a degree of confidence both parties can afford the loan, but there can be times when life changes for us.

What Happens If a Guarantor Loan is in Default and The Guarantor Does Not Pay?

With guarantor loans it is expected that the borrower pays the monthly payments, if for any reason those payments are not paid, the lender will contact the borrower as to why the payment(s) have not been paid.

If the borrower cannot pay the payment(s), the lender will then contact the guarantor to pay the payment.

The guarantor is responsible and liable for the loan payments until the borrower can pay the payments again, no matter how long this time frame may be.

If the guarantor cannot pay the payments, for whatever reason, such as they may have lost their job, or no longer can afford to repay the payments, or they refuse to pay the loan payments, the lender may escalate their collection efforts against the guarantor.

If for any reason the guarantor can no longer afford to pay, while in the end the outcome can be the same, the lender may try to work out a repayment arrangement between both the borrower and guarantor to make payments.

If no agreeable payment arrangement can be set-up, or the guarantor refuses to pay, the lender can begin the collection process against the guarantor, which an include having the loan reported as being in default on the guarantor’s credit history, and possible legal action, such as a CCJ/County Court Judgment, and even Enforcement Orders, such as the use of Bailiffs, wage attachments, and even Charging Orders.

The loan is the responsibility of both the borrower and the guarantor, but the bottom line is that the guarantor has signed and accepted the liability of the loan from the beginning. Should the borrower fail to pay the loan, the guarantor is expected to and is liable to pay the loan.

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<strong>What is Our Criteria For Applying?</strong> 
Every lender on our website has their own specific criteria by the basics are mentioned below and you must have a guarantor to be eligible. Simply select the lender of your choice and you will be taken directly to their website where you can apply. You will be required to submit your details including:<li style=”text-align: center;” data-mce-style=”text-align: center;”>Name (must be over 18 as the borrow, 21 or 25 as the guarantor)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Residence (your chances will improve if your guarantor is a homeowner)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Employment status (must be employed or on a pension)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Income (earning at least £600 per month and able to make repayments)</li><br /><li style=”text-align: center;” data-mce-style=”text-align: center;”>Monthly expenses (not have too many loans open or in major debt)</li>
 
You will then be asked to include the details of your guarantor and as mentioned above, this is usually someone who you know and trust and wants to help you with your personal finances. Ideally, a guarantor with good credit will maximise your chances of being approved based on the idea of ‘if someone with good credit trusts you, well we can too.'<strong>How Much Can I Borrow From Guarantor Loans?</strong>Guarantor Loans gives applicants the chance to borrow £500 to £15,000 depending on the lender. Some lenders we feature like Buddy Loans only have a maximum loan value of £7,500 and TFS Loans is the only lender that stretches up to £15,000.Factors that can influence the amount you can borrow revolve around having a good guarantor. One that is a homeowner, with solid employment, income and good credit rating will maximise your chances of borrowing the largest drawdown possible.The lenders featured on Guarantor Loans see a homeowner as someone who has already gone through the rigorous process of credit checking and affordability and if they can afford a house, they should be able to act as a guarantor for you.By comparison, having a guarantor that is not a homeowner offers slightly less security and means that amount you can borrow is slightly less too.Higher amounts may be available to those who already have a better than average credit rating, are homeowners themselves and a repeat customer with the lender who has already paid their loan on time. To apply directly with your lender of choice see <a href=”https://www.paydaybadcredit.co.uk/direct-lender/” data-mce-href=”https://www.paydaybadcredit.co.uk/direct-lender/”>direct lenders</a>.<strong>What Does The Guarantor Have To Do?</strong>Upon completing an application, the lender will typically send you a <a href=”https://www.handbook.fca.org.uk/handbook/CONC/4/2.html” data-mce-href=”https://www.handbook.fca.org.uk/handbook/CONC/4/2.html”>pre-contract loan agreement</a> and SECCI (Standard European Consumer Credit Information form) which will highlight the terms of your loan. You and your guarantor will be required to review the terms of the loan, including the loan drawdown, fees, repayment dates and responsibilities – and this can be signed via an online verification process using your email and mobile phone.The lender will usually carry out an individual phone call with you and your guarantor to ensure that you both understand the responsibilities and what is required of you – notably that if you cannot make repayment, your guarantor will be required to pay on your behalf. Further to some additional credit and affordability checks, funds can typically be transferred within 24 to 48 hours (or sometimes on the same day).<strong>Are Guarantor Loans Available For Bad Credit Customers?</strong>Yes, even if you have a history of adverse credit, <a href=”https://www.gov.uk/county-court-judgments-ccj-for-debt” data-mce-href=”https://www.gov.uk/county-court-judgments-ccj-for-debt”>CCJs</a>, bankruptcy or IVAs several years ago, you can still be eligible. The idea is that you are using your guarantor and their financial history to ‘back you up’ and give your loan extra security. However, it is noted that your guarantor should have a good credit score and consent to co-signing your loan agreement.<strong>How Soon Can I Receive Funds?</strong>Guarantor Loans works with lenders that can facilitate funds within 24 to 48 hours of approval, or sometimes on the same day.When your funds are successfully transferred, most lenders working with Guarantor Loans will send the full amount to the guarantor’s debit account first. This is a standard security measure carried out by lenders to ensure that the funds are going to the right person and confirms the involvement of the guarantor. The guarantor usually has a ‘two week cooling off period’ where they can decide to pass on the money to the main borrower or they can change their mind and return the funds with no extra charges.