What is a guarantor?
A guarantor is a third party who ‘guarantees’ a loan, mortgage or rental agreement. This means they agree to repay the total amount owed if the borrower or renter can’t pay what they owe. By guaranteeing the agreement, you become responsible for any arrears that occur.
Before you agree to be a guarantor, it’s very important to check both you and the renter or borrower really can afford to keep up with all the repayments. You need to be fully aware of what could happen to you if the other party fails to pay what they owe. Find out more about guarantor loans.
In the first instance, try to negotiate a payment arrangement, based on what you can afford, to avoid the lender taking any further action to recover the debt.
Guarantor loan debts can be included in most debt solutions, including debt management plans and bankruptcy.
Considerations before being a guarantor
It’s important to understand the risks and how you’d be able to afford to cover repayments before guaranteeing a loan, mortgage or rental agreement.
- Ask the borrower/renter to go through their current financial situation in detail to check they can afford the repayments.
- Put some money aside as a ‘just in case’ fund that you can use to repay some, or all, of the loan if you have to.
- Make sure you read and understood all the documents before you sign the agreement.