• Tell your lender as soon as possible
  • A new repayment plan may be offered
  • Your guarantor will be contacted to pay the loan if it is not possible for you to do so.

If you are the main borrower of a guarantor loan, you should inform your lender immediately if you cannot pay back the loan. If you cannot pay the loan back due to a change in financial circumstances, letting your guarantor lender know can relieve some pressure.

This is because most lenders will call, email and send letters to you if you default on payments without letting them know, and this may add to the stress you likely already feel.

By contacting them to let them know, you can alleviate potential problems, and they may agree to freeze interest for a certain period of time.

When getting in touch with the lender about your change in the situation, it might be possible to agree to a new payment plan. The idea is that this would be a more affordable repayment plan for you, under these new circumstances.

If it is not possible for you to pay back the guarantor loan in any way, then the lender will contact your nominated guarantor to get the money back. This is the main responsibility of the guarantor: to make loan repayments on your behalf if you are unable to, or if you simply do not pay the loan back.

The guarantor will be typically contacted through either a phone call, email or letter.

What happens if I do not tell the lender I cannot pay the loan?

If you do not inform the lender you cannot pay the guarantor loan, they will still make contact with you and your guarantor until it is resolved. If you do not contact the guarantor lender about your change in circumstances, you may be charged additional interest.

Will my credit score be affected if I can’t pay my guarantor loan?

Yes, if you are unable to pay the loan back, this will be noted on your credit file. Defaulting on loan repayments will negatively impact your credit score, which could pose problems in the future.

For example, it may harm your ability to get access to a loan or other kinds of credit in the future. This is why you should always consider carefully whether you need a guarantor loan or not, as it is a big financial commitment and potential risk too.

Will my guarantor’s credit score be affected if I can’t pay my guarantor loan?

Yes, as you have signed a joint agreement to the loan. If the guarantor fails to make repayments for the guarantor loan when this has been requested, this will negatively impact their credit score too.

What happens if the guarantor refuses to pay?

  • A number of contact attempts will be made first
  • Assets put up as collateral may be taken
  • Court action may be considered

The lender will first try to contact the guarantor by phone, emails or through letters. If the guarantor still does not pay, additional action may be taken. This is because the guarantor becomes legally obliged to pay the money back if the main applicant is unable to, as this was the terms of the contract that they signed up to. By not paying this loan back, the guarantor is breaking the terms of the loan agreement.

Consequently, if this loan is not paid back by the guarantor when requested, any assets put up as collateral for the loan may be taken. This is often why guarantors are required to be homeowners, as their property is commonly used as security for the loan. This high-value asset often mitigates some risk to the lender in granting the loan in the first place.

As a result, this is why potential guarantors should always consider very carefully the potential risks involved. If they and the main borrower cannot pay the loan back, the guarantor could lose their home.

Can I stop being a guarantor?

  • No, if the two-week cooling-off period is over
  • The loan is largely granted on basis of your creditworthiness, which is why you can’t stop being a guarantor.
  • Unless you pay the loan in full early you cannot stop being a guarantor.

No, if the loan is still outstanding and the initial two-week cooling-off period is over, then it will not be possible to simply stop being a guarantor outright.

The two-week cooling-off period refers to the time just after the initial loan agreement has been signed and the funds transferred. During these two weeks, it is possible for you to terminate the contract without having to incur any additional fees.

When the guarantor loan agreement is signed by both parties and approved by the lender, the funds are then transferred directly into your account. It is at this stage where you can decide to either send back the money to the lender or transfer these funds to the main borrower.

The main reason you cannot get out of a guarantor loan agreement, or change guarantors, is because the nominated individual plays an important role in the application. Usually, this is down to the main borrower requiring a guarantor due to a less than perfect credit history themselves, or a lack of credit history.

Consequently, the creditworthiness of the guarantor, who legally agrees to pay the loan back if the main applicant can’t, becomes vital to the success of the application.

Changing the guarantor could impose a greater risk to the lender, and change the basis which the loan was agreed on.