Being a guarantor means helping someone else get credit. Acting as a guarantor, you’re “guaranteeing” someone else’s credit repayments by agreeing to repay the debt if they don’t. It’s sensible to only agree to being a guarantor for someone you know well.
There are risks involved for both borrower and guarantor, so you should enter a guarantor agreement armed with all the facts.
Almost anyone can be a guarantor. It can be a parent or spouse (as long as you have separate bank accounts). Sometimes a friend or relative. You should only be a guarantor for someone you trust and are willing and able to cover the repayments for.
To be a guarantor with 1Plus1 you’ll need to be over 21 years old if you aren’t a homeowner, with a good credit history and financial stability. If you’re a homeowner, this will add credibility to the application.
If you’ve been approached by a family member or friend or you’re considering asking someone to be a guarantor, you need to be aware of the possible financial risks. If the borrower doesn’t repay you will be legally liable for repayments. These situations can sometimes end friendships or cause family feuds. Borrowers and the guarantors should think seriously about whether they can commit to maintaining the payments.
It’s most likely one of the reasons below:
You need to be close enough to the person to discuss their finances openly.
Ask yourself before agreeing to be a guarantor:
It can cost you money if the borrower doesn’t repay, as you’ll have to make them instead. If you can’t meet the repayments, you could face legal action.
Once you’ve signed the agreement and the loan’s been paid out, you can’t get out of being a guarantor. Lenders won’t remove you from the agreement because your credit history, employment and other factors all had an impact on the approval of the loan.
You’re not likely to be accepted with a bad credit history or have a low credit score.
As a rule, the higher your score, the better.
If the borrower makes their repayments your credit score won’t be affected. If the loan goes into arrears – default and you have to cover any of the borrower’s repayments, this will be recorded on your credit report. If you don’t pay, your credit rating will be affected.
Becoming a guarantor doesn’t normally appear on your credit report. But:
Remember that guarantor agreements can vary from lender to lender. Check the terms carefully. If you’re still unsure about anything or how it could affect your credit report, speak to the lender before agreeing to anything.