What is a...

Guarantor

A Guarantor is someone who agrees to pay a loan or routine payment (such as rent) on your behalf if you miss a payment. This person is usually a relative or close friend – certainly someone close to the borrower. If they do have to pay, they acquire rights to sue you to reclaim their losses.

If you are having trouble finding a loan provider or mortgage lender willing to lend as much money as you need (either because your salary is low, you already have a lot of debt or your credit rating isn’t strong enough) you might find they become more amenable if you can provide a suitable Guarantor.

Once the deal has been signed, a Guarantor is legally bound and they can be made to pay out at any time during a mortgage or loan term even if it means selling their own home. For that reason it has come under a lot of scrutiny recently and has become subject to tighter regulations, with affordability assessments now needed to be carried out on Guarantors to ensure they can cope with the additional burden.

What is required to be a Guarantor?

To be acceptable to a lender, a Guarantor must prove they can handle the additional cost of the loan (should the borrower miss payments) on top of their current monthly obligations and expenditures.

How do I stop being a Guarantor?

The lender is unlikely to agree to release a Guarantor from an agreement unless the borrower is able to remortgage.

Does being a guarantor affect my ability to get credit?

It can. Once you agree to become a guarantor for someone, their loan/ mortgage repayments are factored into your affordability too. If the account were to fall into default, this could be added to your own Credit Report, which would in turn affect your ability to take out other forms of credit.

If you haven’t already, you can check your Multi Agency Credit Report with checkmyfile. Free for 30 days, it’s then just £14.99. It’s the most detailed Credit Report in the UK, letting you easily see your information across all four Credit Reference Agencies.

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