Guarantor loans in debt management plan

gw432

My son has a guarantor loan of which I’m the guarantor. He is now struggling to make the payment and has other debts and is entering into a debt management plan (DMP), which will include this loan. This plan will offer a reduced monthly payment to the guarantor loan lender - will I be expected to make up the difference each month to keep the loan on its original terms? Or will the lender allow the loan to be paid off longer using the new reduced payments under the DMP. 

jjames1985

They'll default him and then they'll just chase you for the money.  They won't be interested in your son anymore.  You're a prime borrower after all and that's why they use suckers like you to turn subprime borrowing into prime.  Genius really.

But a little bit devious.

[Deleted User]

gw432 said:

My son has a guarantor loan of which I’m the guarantor. He is now struggling to make the payment and has other debts and is entering into a debt management plan (DMP), which will include this loan. This plan will offer a reduced monthly payment to the guarantor loan lender - will I be expected to make up the difference each month to keep the loan on its original terms? Or will the lender allow the loan to be paid off longer using the new reduced payments under the DMP. 

The lender will come after you as the guarantor for any short fall.

Willing2Learn

gw432 said:

My son has a guarantor loan of which I’m the guarantor. He is now struggling to make the payment and has other debts and is entering into a debt management plan (DMP), which will include this loan. This plan will offer a reduced monthly payment to the guarantor loan lender - will I be expected to make up the difference each month to keep the loan on its original terms? Or will the lender allow the loan to be paid off longer using the new reduced payments under the DMP. 

Your son could self-manage the DMP.  He could then maintain his monthly contractual payments toward the loan, whilst all his other creditors would receive monthly repayments in accordance with his SM DMP

DCFC79

gw432 said:

My son has a guarantor loan of which I’m the guarantor. He is now struggling to make the payment and has other debts and is entering into a debt management plan (DMP), which will include this loan. This plan will offer a reduced monthly payment to the guarantor loan lender - will I be expected to make up the difference each month to keep the loan on its original terms? Or will the lender allow the loan to be paid off longer using the new reduced payments under the DMP. 

Any chance you could either maintain the payments or pay it off asap.

mwarby

You should really be treating all creditors equally when your insolvent (sounds like your son is). If it ever progressed to bankruptcy there may be questions as to why one creditor was favoured 

Willing2Learn

mwarby said:

You should really be treating all creditors equally when your insolvent (sounds like your son is). If it ever progressed to bankruptcy there may be questions as to why one creditor was favoured 

By self-managing a DMP, you can neatly sidestep the pro rata distribution of available income.

@gw432
It would be really helpful if your son could post up his Statement of Affairs (SOA), so any that advice is consistent with your son's financial circumstances.
https://www.lemonfool.co.uk/financecalculators/soa.php

foxy-stoat

mwarby said:

You should really be treating all creditors equally when your insolvent (sounds like your son is). If it ever progressed to bankruptcy there may be questions as to why one creditor was favoured 

The guarantor is the principle debtor not the poor sap who cant pay and goes insolvent, so they wont be seen to favor one creditor.

John_

gw432 said:

My son has a guarantor loan of which I’m the guarantor. He is now struggling to make the payment and has other debts and is entering into a debt management plan (DMP), which will include this loan. This plan will offer a reduced monthly payment to the guarantor loan lender - will I be expected to make up the difference each month to keep the loan on its original terms? Or will the lender allow the loan to be paid off longer using the new reduced payments under the DMP. 

As above, you’ll be expected to pay. This is pretty much how the deal on these loans works, a company lends money to someone that they know will default, they then default, and the guarantor pays instead.

Try to make sure there’s no gap when you take the payments over, you don’t want a late payment being recorded on your files.

gw432

Thanks for your replies everyone. I realise that I probably will have to bite the bullet and pay up by settling the debt with a much cheaper loan. I do feel the lender didn’t check properly that he could afford the payments at the time.  The loan was started nine months ago, my son who is married with a young family and lives away was living beyond his means (and still is by the looks of it) and had built up credit card debts, etc and I felt pressured into agreeing to be a guarantor and he assured me could afford/ keep up the payments. I trusted his word. More fool me! Needless to say, relationships aren’t that great between us at the moment. 

mcpitman

The loan company knew that your son cannot afford it, hence the requirement for a guarantor.