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If you’ve been asked to act as a guarantor then it’s important to take the time to consider the decision. For most of us, the impulse to try and help another person out is often strong. However, make sure you’re aware of all the potential consequences for you of agreeing to guarantee someone else’s obligations. It’s not just their credit record and finances that could be affected by the decision but yours too.
A guarantor will step in and take over obligations that have been agreed between two other parties. Essentially, guarantors provide a sort of insurance – an additional way to ensure that obligations are met if the original person who agreed to them is not able to do so. Today, this is most often seen in the context of borrowing. For example, guarantor loans where a guarantor will make payments on a loan agreed with an original borrower if that borrower can’t do it themselves. You might also have been asked to be a guarantor for someone who is looking to rent a property. Sometimes landlords ask for a guarantor so that if the tenant can’t cover the cost of the rent they have agreed to in the tenancy agreement, the guarantor will step in and do this instead.
Lenders, landlords etc are most likely to ask for a guarantor where someone has:
The criteria that lenders, landlords etc apply when it comes to guarantors can differ quite considerably. All guarantors must be over the age of 18 and have a good credit score themselves. Guarantors who are not based in the UK won’t be eligible in most cases. Some lenders may require a guarantor to be at least 21. Others specify that a guarantor must be a homeowner or earning above a certain minimum threshold in order to be accepted. What’s important to note is that, even if you’re eligible to be a guarantor for someone, you shouldn’t necessarily take this on unless you’re very sure about it.
The short answer is that, once it’s signed, you can’t. Until the tenancy has come to an end or the loan has been repaid, the guarantee will remain in place between you and the lender, landlord etc. Many guarantors choose to take out insurance to provide some peace of mind when it comes to the payments that might be required. However, other than that all you can do is to weigh up beforehand whether it’s the right move for you.
Becoming a guarantor isn’t for everyone and you should think carefully about this if you’re considering helping someone out in this way. It’s important to protect your own finances first so that you don’t end up counting the cost of someone else’s mistakes in future.
Alex Hartley is a keen advocate of improving personal finance skills. She's worked at Solution Loans since 2014 and written hundreds of articles about how people can manage their money better. Her interest in personal finance goes way back to...Read about Alex Hartley