Should parents think twice before guaranteeing their children’s loans?

Last post: Jun 29, 2018

As parents we want to give our children every opportunity. When they need a guarantor, we rarely think twice before signing on the dotted line. But should parents be more cautious about guarantor loans?

When it comes to our children, "no" is a difficult word to say – especially when they are older, with plans and dreams they hope to one day achieve.

Times are tough for many young people in the UK today, with stagnating wages, rising costs of living, steep house prices and hard working lives all contributing to very little disposable income and savings.

The bank of mum & dad

With tricky finances to manage, may youngsters now seek help from the "bank of mum and dad". Unfortunately, in the face of today's economic climate, the "bank of mum and dad" is often low on funds too. So what do parents do when they want to support their children financially, but don't have the ready cash to do so?

For many people, the answer is to guarantee a loan that will let their children take important next steps. A guarantor loan is a useful product which helps many people unable to source straightforward finance arrange loans. These loans simply require a guarantor who will be liable for repayments and fees, if the borrower falls into arrears.

Blind faith

As parents we often have a great deal of faith in our children. Although very few guarantor loan users default, there is always the possibility that our youngsters may find themselves unable to meet repayments. In such cases, parents must think carefully about whether or not they can really afford to make repayments if the loan fails.

Just like any potential guarantor, parents should absolutely think very carefully before signing on the dotted line. First they must consider exactly how confident they are that their child can honour the loan. Secondly they must decide whether or not they have the capital to cover the costs if not.

Asking to see thorough financial plans, bank statements and more may seem ruthless or invasive, but it is these types of steps which will lead to the honest, effective use of guarantor loans between parents and children.

At Choice Personal Loans we connect borrowers with guarantor loans that work for them. To find the best fit for you, contact our finance experts today.