21 Oct Can I Stop Being Someone’s Guarantor?
No, if you have agreed to become a person’s guarantor for a loan , when you cannot suddenly stop being a guarantor once the full loan amount has been paid out.
We understand that the duration of a guarantor loan can last for a long period of time (such as up to 5 years) and it is possible that our personal circumstances or the relationship we have with the borrower can change during time.
However, once you agree and sign the guarantor loan agreement, you are required to be the guarantor until the end of the loan term
How can I stop being a guarantor for a loan?
The loan agreement will be terminated if the loan has been repaid off in full. If you want to repay early (whether it is you or the borrower), it will always be cheaper to repay early because less interest is accruing over time. For instance, a £5,000 guarantor loan will cost £3,000 in interest after 3 years, or £5,500 after 5 years.
Can I switch, change or get a different guarantor?
Sadly not. The main reason why you cannot be removed from a guarantor loan agreement at a later date is because you play a significant role in the application process. It is usually the guarantor’s employment status, credit history and ability to repay the loan that determines the success of the application, the loan amount and rates charged.
If a guarantor was removed and replaced with another person, this could end up causing complications, as the new guarantor may not necessarily have the exact same credentials as you, which could pose a risk to the lender.
What happens if the guarantor dies?
In the unlikely event that the guarantor dies before the loan has been paid off, or the guarantor dies and the main borrower is unable to carry on with the loan repayments, then it is possible you can be replaced by a spouse of the deceased. Equally, the lender may have a right to the deceased’s estate and any possessions to help pay off the loan. There has already been a case of this recorded.
Is it possible to have more than one guarantor on a loan application?
No, almost all guarantor loan lenders stipulate that you can only have one person to guarantee the loan.
However, you can apply with more than one guarantor, if you want to see which one will be successful.
There is a two-week cooling-off period for guarantors
It is important to remember that the majority of lenders will give you a two-week cooling period where you can change your mind, return the funds and not have any charges. This is because the money is usually sent straight to the guarantor first, and they can decide as to whether to send this money not the main borrower or straight back to the lender.