Real-life MMD: Should I act as guarantor for oldest friend's son?
Former_MSE_Debs
Former MSE 890 Posts
Money Moral Dilemma: Should I act as guarantor for oldest friend's son?
A very good friend lost his job a year ago, but has since got a job and has an IVA in place. His son now wants to start a business. He's been turned down for a business loan of £5k and can't get a personal loan without a guarantor. My friend can't stand as guarantor as his assets are in the IVA, so he's asked if I will. He's suggested drawing up a contract to guarantee that he'll pay us if his son defaults. I'm not convinced his son has the business acumen to make a go of it, but this is one of my oldest friends asking for help. Should I do it?
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A very good friend lost his job a year ago, but has since got a job and has an IVA in place. His son now wants to start a business. He's been turned down for a business loan of £5k and can't get a personal loan without a guarantor. My friend can't stand as guarantor as his assets are in the IVA, so he's asked if I will. He's suggested drawing up a contract to guarantee that he'll pay us if his son defaults. I'm not convinced his son has the business acumen to make a go of it, but this is one of my oldest friends asking for help. Should I do it?
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Note: Please remember that these are real-life Money Moral Dilemmas and while we want you to have your say, please remember to be nice when you respond.
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If you are worried about your friendship, then I would suggest a white lie. Something along the lines of you have had to lend some relative a similar amount for some domestic emergency and haven't got any spare cash as a result. If he is a good friend, then preserving the status quo is important. He may well be expecting you to say no anyway.
Remember the £5k will attract interest (do you know at what rate??) and therefore your potential loss would not be limited to the £5k.
Its a BG ask and few people would be in a position to agree to it.
Run a mile from this one.
If you wouldn't lend him the money yourself don't go near it.
As stated above you should consider the money as lost if you did. Assuming the worst what would your relationship with your friend be.
The excuse of no cash or money tied up may not work as they may just want an asset to secure the loan against (Your home?)
Perhaps (And about the limit of what I would /could do for a blood relative) you could suggest you look into going into partnership with the son this would give you more control.
About all I would act guarantor is a flat rental for someone I would have living in my home.
Those guarantor loans usually have horrendous interest rates and loan default charges. You'd probably be looking at closer to £9000 if you ended up having to pay it back.
Unpaid £5000 becomes £7056 unpaid in a year (using 41.16% interest)