Debt advice when your guarantor loan has or is soon set to run into payment problems

Guarantor Loan Debt overview

A Guarantor Loan is where you receive credit on the proviso that someone else, typically a friend or family member, legally promises to repay the loan if you can’t.

Many guarantor loans are designed for those who’ve had poor credit and/or have been rejected by other creditors.

This form of debt should be thought of as a joint debt, with both people responsible for repaying it.

The advantages of Guarantor Loans as a credit solution

  • Guarantor loans can be one of only a few options for a loan for those who have especially poor credit.
  • Most guarantor loans can be repaid early, with the consumer receiving a refund in interest.
  • Terms can be flexible, with loan durations running up to 60 months and loan amounts of up to £10,000.
  • Opting for a guarantor loan can mean that you receive funds more quickly, from some providers this can be within as little as 24 hours.

The disadvantages of Guarantor Loans as a credit solution

  • Guarantor loans always have a high APR rate, although this rate is lower than those for Payday Loans.
  • If you’re considering this form of credit you must be honest with your guarantor about your financial situation.
  • If repayments are missed or the loan enters into default the credit rating of both your guarantor and yourself will be impacted.
  • Guarantor loans demand a lot of trust between yourself and the person guaranteeing your loan. Should you not keep up with your obligations you may quickly find that your relationship deteriorates.
  • Even if your guarantor pays the loan after you’ve defaulted, they will still be legally entitled to claim their losses back via the court system.

Worried about debts that won't go away?

Debt help tips for tackling Guarantor Loan Debts

  • Seek advice if you think that you have reason to complain about the guarantor loan. There are three main reasons why this may be the case…
    • The loan was unaffordable to you
    • A ‘top up’ loan was given without you explicitly agreeing to it
    • You were put under pressure to become a guarantor with undue influence (such as being in an abusive relationship, being asked by your manager or by someone you rely on for care).
  • Speak to your guarantor and ask them for some leeway in finding a solution. Then as soon as you’re able, research potential debt solutions to improve your financial standing to a point where you can keep up with future repayments on the guarantor loan.

IVAs – A potential solution for Guarantor Loan debt

Dealing with Guarantor Loan debt can be among the most stressful debts of all. If you’ve reached the end of your options, such as taking a payment break or re-negotiating the loan terms, an Individual Voluntary Arrangement may be a suitable debt settlement solution.

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