Guarantor for loan

nolastchance

A family member has asked me to be a guarantor to enable them to get a loan. What are the risks for me if I say yes.
Thanks

mr_stripey

You will be responsible for paying it back if they fail to do so (which is quite likely - it has been seen time and time again on these boards)

If they require a guarantor they are probably not a good credit risk, so the loan company puts all the risk on you.

nolastchance

mr_stripey said:

You will be responsible for paying it back if they fail to do so (which is quite likely - it has been seen time and time again on these boards)

If they require a guarantor they are probably not a good credit risk, so the loan company puts all the risk on you.

I thought as much. Now just to figure out how to say no to them. 

Debbie9009

If they don’t pay the loan you will have to pay it so you need to be able to afford to do that.

It will most likely reduce your borrowing power, as the loan will most likely be taken into account when assessing your income and commitments.

If the family member stops paying the loan and you have to take over paying this, how will you feel about this ? It can create a lot of bad feeling.
How will you feel if they stop paying, but go on an expensive holiday, or a spending spree?

Needing a guarantor, means the loan company don’t think your relative is a good risk, so are you happy to guarantee the loan knowing that a company who is in the business of loaning money thinks there could be problems ?

I personally wouldn’t do it, and I think you will get a lot of answers that will say the same.

[Deleted User]

If they need to borrow money you might as well borrow it at a better rate and then they pay you - at least that way you know you will be responsible for the debt rather than waiting until they default and then having to pay 50% APR or whatever

Obviously though don't get involved, if they need a guarantor loan it means they cannot get a normal loan = mainstream lenders won't touch them as they know they won't get paid back - which says it all about your risk of backing them

SusieT

No way, as others have said, if their finances are so bad that they need a guarantor you have a very high risk of needing to repay it. Normally the only people who need a guarantor for a loan are those with a really bad repayment record and they are less likely to repay you than a lender.
I would tell them that you are sorry to be blunt, but they need to sort out their finances so that they do not need to have a guarantor. Suggest they speak to payplan.com or stepchange.org (beware of others with similar sounding names), and get themselves sorted out. 
Be aware that they may try the "there is no problem" "its only" or "but I need"  excuses, but PLEASE hold firm and practice saying no without any explanation to whatever their reasons. Good luck

MEM62

nolastchance said:

mr_stripey said:

You will be responsible for paying it back if they fail to do so (which is quite likely - it has been seen time and time again on these boards)

If they require a guarantor they are probably not a good credit risk, so the loan company puts all the risk on you.

Now just to figure out how to say no to them. 

A very wise decision.  

nolastchance

Thanks everyone. I just feel really bad saying no but I need to remember that saying yes could leave me ending up in a lot of debt. 

[Deleted User]

Explain, to them, the risk to yourself if they don't keep up their payments, if they're not particularly concerned about this it might make your conversation easier !
They might not have actually had any idea that it works like that and that might make them change their mind. 

I was in this situation, with a family member, last year, the conversation didn't go down well but ..... within 6 months the debt they'd got themself into meant most of the 'stuff' they'd used the money for got repossessed ..... 
It was about 25k in the end.
I'd have been paying/liable for the bulk of that if i'd agreed to their plan.

MalMonroe

nolastchance said:

Thanks everyone. I just feel really bad saying no but I need to remember that saying yes could leave me ending up in a lot of debt. 

Better to say no now than end up in the position of having to repay somebody else's loan. And not to mention, family relationships could be ruined completely.

People have every right to ask you anything at all but it is your right to either accept or decline. You don't really have to explain any further than you'd rather not, thank you. 

Debbie9009

For what it’s worth I don’t think you should feel bad about saying no, if they are true friends/family they will accept your decision and that will be an end to it.