If you have signed an agreement for a guarantor loan in the UK, you are responsible for the debt if the borrower defaults. A guarantor loan is often used when a borrower has poor credit and needs to obtain a loan. The borrower asks a second person to cosign on their loan. This can help them obtain funding that they would not have been able to get on their own and can also have the added benefit of lowering interest rates.
However, if you are a guarantor on a loan, your financial situation may have changed since you signed for the loan. You may be wondering if it’s possible to get out of the loan. Or perhaps you are considering signing as a guarantor for a loan, and want to know if it’s possible to get out of the agreement if your situation changes. The short answer is no, once you’ve signed the agreement, you are responsible for making the payments if the borrower does not. You will be turned over to collection agencies if you default on the payments. This will affect your credit the same as if you were the borrower of the loan.
Can you be replaced with another guarantor?
No, it’s not as simple as replacing one with another. If you are a guarantor for a loan, when funding the loan and deciding on an interest rate, the lender took into account your financial history including credit history, employment history, and income level. It’s not possible to simply be replaced by another person as a guarantor of the loan.
Can you withdraw as a guarantor?
No, it’s not so easy to withdraw. If you want out of the loan, you can take the following steps.
You pay the loan off early.The borrower pays the loan off early.Check your agreement, some lenders allow guarantors termination after a certain period. This is not always the case, and with many loans, the guarantor will be responsible for the life of the loan.File a complaint with the lender. Lending agencies do accept complaints from guarantors. There is no guarantee that they will release you from the loan, but many have outlined steps on their websites to follow if you want to complain.
How to complain as a guarantor of a loan.
Lenders will accept complaints if you are trying to get out of a guarantor loan in the UK. Check the website or call the lender to find out their requirements for filing complaints.
Some reasons lenders may accept for terminating the loan agreement with a guarantor are:
You didn’t understand the loan agreement when signing.Your financial situation has changed, you have lost your job or had unexpected expenses.You don’t speak English well and didn’t realize you were responsible for payments if the borrower defaulted.You thought you only had to make payments if the borrower died.
The bottom line.
If you are considering signing as a guarantor for a friend or family member’s loan, you need to take it seriously. Do not agree to be a guarantor for anyone unless you know you are financially able to take on the loan payments if your friend or family member stops paying. It’s extremely difficult to get yourself removed from a loan as a guarantor unless the loan is paid off. Don’t sign any agreements without reading all the fine print and being certain you understand what you are agreeing to.