What is a Guarantor
A Guarantor is someone you know who is happy to guarantee your guarantor loan will be paid by themselves should you stop making the repayments yourself. It is a very selfless role in a loan agreement and this is why you will usually find guarantors are close friends or members of your family.
What are the responsibilities of being a Guarantor?
The guarantor signs an agreement that he or she will repay the loan taken out by another person to the guarantor loan lender. This means the lender can demand the payment of the loan from the guarantor should the borrower fall into arrears. This is solely on the outstanding amount. Usually the guarantor is expected to secure the loan using their home but this is can very depending on the lender. FLM Loans for example require the guarantor to have a good credit history and be a homeowner against which a charging order can be placed should the loan payments fall behind.
What happens if the borrower dies?
In this sad and unfortunate circumstance the guarantor becomes liable for the outstanding balance of the loan. There may well be insurance products on the market that cater for this eventuality, indeed as a guarantor insuring yourself against such a thing may be prudent.
The legal rammifications
If such a situation arises that the guarantor is required to pay their obligation the law will quite often give the guarantor a right of subrogation. This allows the guarantor to recover the debt or cost of payment from the borrower.
Does a guarantor have to be a homeowner?
Yes is the typical answer. The guarantor must secure the loan against a property to ensure the guarantor loan lender will recoup their money.
Is finding a guarantor hard?
Realistically it's as easy as you are trustworthy. If people you know have faith in your ability to pay back the loan and believe you to be trustworthy they will likely be a guarantor for you. And who knows maybe one day you can do them a big favour in return.
Loans without Guarantors
There are loads of loans out there that require no guarantor but they are an awful lot more expensive than gaurantor loans.
