No, unless the loan is fully repaid by you or the main borrower this is not possible once the two week initial grace period has finished. After you have signed up to be a guarantor in a formal loan agreement, you have to keep to the terms of the contract.
This is why you should make sure you have fully understood the potential financial complications and legal obligations you have when you sign up to become one.
Why can I not stop being a guarantor?
The guarantor lender has agreed to lend money largely on the basis of your financial history, not the main applicant’s.
Your credit history, employment status, location, age, and whether you have passed affordability checks all indicate your ‘creditworthiness’ to the lender. This creditworthiness is what ultimately determines whether the guarantor loan is approved or not in many cases.
Changing the guarantor with a new person is complicated as it is unlikely the new person will have the exact same financial credentials as you. This could mean that there is a greater level of risk to the lender.
Will being a guarantor cost me money?
Only if the main borrower who you are a guarantor for does not keep up with the loan repayments. Unless this is the case, you will not need to pay any money when agreeing to become a guarantor.
This is why it is important that you trust the person who you are being a guarantor for can afford to take out this kind of loan, as you will be legally obliged to pay it back on their behalf if they do not.
Will being a guarantor affect my credit rating?
No, your credit score will not be impacted if you become a guarantor for someone’s loan. The only scenario where this would happen is if the main borrower defaults on repayments, and you do not make the payments on their behalf.
This will affect your credit rating because when you agreed to the loan, you signed a contract that stated you would take over legal and financial responsibility for the loan if the main borrower could not pay it back.
That is why you should always carefully consider the potential implications when becoming a guarantor.
Is it possible to have more than one guarantor for a loan?
No, most guarantor lenders will only allow one person to guarantee a loan.
How do you stop being a guarantor?
- Paying the guarantor loan off early
- Get the borrower to pay the loan off in full
- The lender goes out of business
- The two-week period to change your mind
The best way to no longer be a guarantor is to ensure that the loan is paid off in full, as this terminates the contract.
The majority of guarantor lenders enable you to make early repayments, but you need to keep in mind you may be charged fees for doing so. Typically, you will be charged additional interest in closing the loan account before a certain period of time has passed.
If it is financially possible for the borrower to pay back the loan fully, they can also terminate the loan, therefore meaning you are no longer have the responsibilities of the guarantor.
Finally, an unlikely situation where you wouldn’t be a guarantor any longer would be if the guarantor loan firm went into administration.
Most lenders provide a two-week period to change your mind on being a guarantor when you sign a loan contract and the money has been transferred.
The loan amount is always sent directly to the guarantor’s bank account first. This allows you to either send the money straight back to the lender or to pass it on to the main borrower.
If you do change your mind in these initial two weeks, you will not have to pay any additional fees for sending the money back.
However, once these two weeks have passed, you will no longer be able to stop being a guarantor.