Advice Needed - How will being a guarantor effect me?

muckyhaud_2

Hi all,
My brother has asked me to be a guarantor on a loan for £2000 over 3 years to consolidate some debts. He doesn't have a credit rating due to falling on hard times in the past. I am sure he will meet the £100 a month payments and even if he didn't my mother would pay it for him.

I on the other hand have an excellent credit rating and fortunately on various loans over the years I have never missed a payment. My questions are:

1, Next year we are going to extend our house and will be applying for a substantial loan in order to do the work. Will being a guarantor effect my chances of being accepted for the loan?
2,Will this show or will I have to declare this as an outstanding loan even though it is for my brother?
3, Should he miss a payment, will the money be automatically removed from my account without informing me?

Thanks in adavnce for any advice

[Deleted User]

My advice is dont do it.

CLAPTON

don't do it

if you are willing to give him 2000 then get the loan yourself.

if he pays you then he pays you,
if not then your mother pays you,
if not then you pay

but your credit rating etc is safe as you know as you are paying.

zzzLazyDaisy

If he defaults, you are legally liable for his debt. Worse, once you are a guarantor you can't later change your mind, even if your/his/your mum's circumstances change, you are locked into it until the contract ends.

I wouldn't go so far as to say 'don't do it' sometimes we do these things for families. I did it for my son, he has kept on track for a year, but has now thrown a complete wobbler so I am expecting to have to pick up the financial pieces.

Only do it if you are sure that you will be willing to make the payments if something happens, because otherwise your credit rating will be well and truly trashed.

EDIT I don't know if your credit rating would be affected if he missed a payment, but as your name would be linked to his it seems likely. It is worth finding out, because the chances are you won't find out there is anything amiss until you get a letter through the door, and it may be too late then to stop it affecting your credit history.

brightonman123

the interest / total seems outrageous! if you feel you can trust repayments, might be worth getting loan yourself, at far lower(?) rate, and do a deal privately.

noo wonder this world is going to pot, when the people in real need get charged the most..

LDJ2009

Could you point him in the direction of his local credit union ?

He'll have to save with them for a few months but any loans will be in his name

If you have a good relationship and trust that he will pay the loan off without a problem, could you apply for a 0% credit card for the £2k then he won't have interest to pay so you can ask for him to clear it over a much shorter term ?

terryw

1, Next year we are going to extend our house and will be applying for a substantial loan in order to do the work. Will being a guarantor effect my chances of being accepted for the loan?

Answer> Yes as the lender will take the loan payment from your disposable income in deciding your ability to repay you loan.

2,Will this show or will I have to declare this as an outstanding loan even though it is for my brother?

Answer> It will show (probably) on your credit file
3, Should he miss a payment, will the money be automatically removed from my account without informing me?

Answer> No, unless you have authorised this

Pitlanepiglet

If you feel you want to help then I would take the loan in your own name and then you have absolute control over what is happening and you don't get any nasty shocks. Otherwise you may end up with additional charges if he doesn't admit to you that he isn't paying.

We were going to do this for OH's son but there is no way I would just be a guarantor for the loan.

Debt_Free_Dreamer

Don't do it. Loan him the money. If you trust him enough to pay the loan, you trust him to pay you back. Borrow yourself as cheap as you can and get him to pay you by standing order into your account.

If he defaults, at least it will not appear on your credit record.

You say your mom would pay the loan if he could not. Can she not loan him the money?

ERICS_MUM

I agree with the last 2 posters - take control of the loan so you can safe-guard your own credit rating. You would also be able to get a better rate of interest and could probably reduce the term by a few months and still maintain the £100 pm repayment.

It really isn't worth wrecking your own credit rating and future borrowing for the sake of £2000. It sounds like a lot of money for your brother but it's probably a lot less than you hope to borrow to extend your house.

Good luck, it's so difficult to say no to close family when they are desperately in need of money.

Linda xx

CHR15

I'm with the others, Don't do it.

There is a simple reason a guarantor is required, they know he is unlikely to make the repayments. If they know the repayments are going to stop, so should you (you do know him better after all!!).

Just take the loan out in your own name and give him the wad of cash and wave goodbye to it. It will save all the hassle downstream if you accept you are going to repay the loan but not benefit from the cash.

Ignore all this "mum will pay rubbish", won't happen. You will be left with it.