What Happens If A Guarantor Is Declined???

Ryanw96
Ryanw96 Posts: 2 Newbie
in Loans
Hi all,

I have a question:

I've been asked to be a guarantor for a small £2500 loan.

I have a GOOD credit rating and have been told my chances of being accepted are very high. However, I do not own my home and this could work against me.

If I was to be very unlucky and be declined to be guarantor, would this effect my credit rating? With it being GOOD I do not want to run the risk of it being put down.

I understand if it was me applying for the loan and I was declined It would have an impact on my credit score, but how does it work if I am declined being a guarantor? Would it have a major impact? Do they do a hard credit search or is it a soft one?

Any more info would be appreciated.

Thank you :)
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Comments

  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
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    Your credit rating isn't a real thing and it doesn't matter if it changes, either up or down. The core is just a gimmick, like a magic 8 ball.

    One search will not be an issue.

    However - I would advise against being a guarantor. It would be cheaper and lower risk to get the loan yourself and give it to the other person, who can then pay you back.
  • Carrot007
    Carrot007 Posts: 4,534 Forumite
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    Deleted_User wrote: »
    However - I would advise against being a guarantor. It would be cheaper and lower risk to get the loan yourself and give it to the other person, who can then pay you back.


    If you want to be lucky OP, then do that!
  • Sea_Shell
    Sea_Shell Posts: 9,338 Forumite
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    I'd echo above. Don't be a guarantor. You'll get much better rates borrowing in your own name. Be ready to gift the money IF they don't pay you back.
    How's it going, AKA, Nutwatch? - 12 month spends to date = 2.31% of current retirement "pot" (as at end March 2024)
  • soolin
    soolin Posts: 72,158 Ambassador
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    Yes it's been said but I don't think it can be said enough- don't be a guarantor for someone who has already got issues with their own credit matters.

    Why on earth do you want to basically take out a very high interest loan to give money to someone else who may or may not bother paying it back? Can you afford to lose the money when it all goes wrong -please read some of the threads on here about guarantor loans and how so many people have wrecked friendships and ended up struggling with money issues when they are talked into being a guarantor for someone.
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  • dresdendave
    dresdendave Posts: 889 Forumite
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    Ryanw96 wrote: »



    If I was to be very unlucky and be declined to be guarantor, .


    You got it the wrong way round.

    Being accepted would mean you were very unlucky.
  • societys_child
    societys_child Posts: 7,110 Forumite
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    Take the advice given above.
    If you take out a loan yourself and lend it to them, it'll be much cheaper for them, and much cheaper for you if they default, and the loan company come back on you for the money.


    Think about it . . .
  • AnotherJoe
    AnotherJoe Posts: 19,622 Forumite
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    I've been asked to be a guarantor for a small £2500 loan.
    Just to be pedantic, are there also medium sized and large £2,500 loans?
    :D
    And another vote to add to the consensus,, take out the loan yourself and have the person pay you back, as long as you are quite prepared to lose the money.
  • sourcrates
    sourcrates Posts: 28,825 Ambassador
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    Ryanw96 wrote: »
    Hi all,

    I've been asked to be a guarantor for a small £2500 loan.

    If I was to be very unlucky and be declined to be guarantor, would this effect my credit rating?

    Thank you :)


    I would suggest you have a quick search around these forums, as guarentor loans cause so many problems for so many people, the main reason being, the customer base for this type of loan are exclusivly people declined for credit elsewere, normally with a history of bad financial decisions.


    It won`t be a £2500 loan, you must also factor in the interest, average rates on these loans can be 49.9%APR, you should not do this unless you can afford to take on the payments if the other person stops paying.


    Although the default rate on these type of loans is less than 5%, we seem to see a disproportionate rate of defaulters on here.
    I’m a Forum Ambassador and I support the Forum Team on the Debt free wannabe, Credit file and ratings, and Bankruptcy and living with it boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.For free non-judgemental debt advice, contact either Stepchange, National Debtline, or CitizensAdviceBureaux.Link to SOA Calculator- https://www.stoozing.com/soa.php The "provit letter" is here-https://forums.moneysavingexpert.com/discussion/2607247/letter-when-you-know-nothing-about-about-the-debt-aka-prove-it-letter
  • Sea_Shell
    Sea_Shell Posts: 9,338 Forumite
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    I guess that's the nature of the forum.

    People ask for advice because there's a problem. We don't hear about the ones that get paid back without issue.

    Still doesn't mean it's a good idea.
    How's it going, AKA, Nutwatch? - 12 month spends to date = 2.31% of current retirement "pot" (as at end March 2024)
  • DCFC79
    DCFC79 Posts: 40,598 Forumite
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    Ryanw96 wrote: »

    If I was to be very unlucky and be declined to be guarantor, would this effect my credit rating? With it being GOOD I do not want to run the risk of it being put down.

    I understand if it was me applying for the loan and I was declined It would have an impact on my credit score, but how does it work if I am declined being a guarantor? Would it have a major impact? Do they do a hard credit search or is it a soft one?

    Any more info would be appreciated.

    Thank you :)


    It wouldn't effect your credit file.


    Can I ask a question if I may.


    Are you entirely aware what being a guarantor entails ?
    Either refuse to be one or do as suggested and take out a loan for the amount and give the money to said person.
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