What happens if you can't repay a guarantor loan?

Last post: Feb 5, 2018

Taking on a guarantor loan means promising your nearest and dearest that you will be able to repay what you owe. But what happens if you find yourself unable to honour that promise? Our experts explain...

Guarantor loans are rising in popularity in the UK. Accessible and often quick to arrange, these products give borrowers the ability to find finance with the support of a guarantor (typically a friend or family member). This arrangement means that your guarantor is liable for your loan if you are unable to pay, which gives lenders confidence that they will not be left out of pocket.


How it works


Often used by individuals who find it more difficult to access conventional finance (such as bank loans), often as a result of a poor credit score, or a short time-frame. These loans typically complete successfully. With their close relationships on the line, few people use such products irresponsibly and few guarantors sign on the dotted line if they are not confident of the borrower's ability to repay what they owe. However, in rare situations, the worse can happen…

Circumstances can change rapidly. Jobs can be lost. Emergency expenses can arise. Changes in situation can occur. There are some unlikely but not impossible events which could affect your ability to repay a guarantor loan.


What happens if you can't pay?

If you are unable to repay your guarantor loan, your "next steps" will depend greatly upon your lender. Different lenders have different policies and approaches. Make sure you familiarise yourself with these before going ahead with any finance product.


Communication is key

In broad terms, however, missing a repayment or realising you will be unable to meet your repayments probably will not result in instant doom. The first step that every borrower should take is to notify their lender and discuss their circumstances in detail. It's highly likely that an alternative repayment schedule can be arranged, likely with smaller amounts over a longer period (although interest will inevitably be higher over the longer term). Getting in touch with your lender at the first hint of an issue is crucial.

In the rare event that you lose control of your loan and find yourself absolutely stuck, your lender will most likely be in touch repeatedly to try to solve the problem. If you have zero options, your repayment will be taken from your guarantor. This is especially likely if you do not communicate with your lender. How many repayments and how much of the loan they will have to pay will also depend on your circumstances and how closely you choose to work with your lender. Co-operation will give you a much greater say in how the process proceeds.


Confident you can repay a guarantor loan and require fast flexible finance? We can help uncover your ideal loan. Contact our experts to discuss your requirements today.


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