GUARANTOR LOANS INFORMATION | GUARANTOR TERMS AND CONDITIONS - YouTube

So you're thinking about becoming a guarantor.

Before you do that you want to read the terms of conditions.

But let's face it: no one reads the terms and conditions. So let's do it together.

The two big things that you have to do:

One is you have to take the money from the loan company and give it to your borrower

or the person you're guaranteeing the loan for.

but actually some issues do arise from that.

One of the issues is when the borrower claims

between you, the company, and the borrower.

The second thing here is basically the next three bullet points are fairly standard

in the sense that what they're saying is that if the borrower doesn't pay,

you have to -- either make the next payment or, if it's defaulted, you need to

make all the payments straight away or he should do to make all those payments straight away.

The other point, which is a little bit more subtle, is you are also being

asked to indemnify, as in kind of give a guarantee, if you like, for the company

against any claims that the borrower might have against them.

So if the borrower tries to sue the loan company for whatever reason,

actually the loan company can claim that money back off you.

That's a slightly weird thing, but basically it means that the borrower effectively has a few less rights than

they would do it was a normal loan.

Okay. Breaking the agreement. The feeling here is this is the sort of scary paragraph.

This says that they may obtain an attachment of earnings, they may deduct

the money from your salary if you can't pay them immediately they may send on

the bailiffs or they may get a charging order on your house.

A charging order basically means that if you sell your house in the future

they get their debt gets paid first before you get any money from that.

So these aren't just words on paper. In order to put this in the terms and

conditions they have to do it sometimes. I don't know how often they would,

but given that guarantor loans are often sort of relatively significant amounts of money

five-six thousand pounds they probably do it more often than you think.

Okay. Continuing guarantee. I think there are two bits here you might want to just think about.

First is this one which I don't quite understand actually, which says

"You will continue making the guarantee even if there's a change to the

borrower's credit agreement." So, for example, if they put the rates up on the

agreement, your guarantee's not affected, and actually I think it means

that if they lend more to the underlying borrower you still have to guarantee it.

If that's the case that's quite dodgy and you should probably clarify that before you sign up.

The other thing to be aware of down here is that

if the borrower goes bankrupt or gets some kind of debt relief order, does an IVA,

which is a form of bankruptcy, they are off the hook for all their debts

they don't have to pay any more or only a certain amount

based on the terms of the bankruptcy, but YOU are on the hook for the whole amount.

So you would have to do an IVA, you would have to go bankrupt for this debt to be

written off -- it's not enough for the borrower to go bankrupt.

The steps below or the paragraphs below card payment authorities.

Two bits here which I'll draw your attention to: The common authority is when they use the debit card

that you give them to just take money out of your bank account.

They won't do this straight away after the borrower has missed a payment.

They'll wait for 15 days, then on the fifteenth day...

and they will also have tried to contact you... So, essentially it's sort of 15 days,

two weeks grace before they go for your bank account.

If they do go if your bank account one thing to remember is, if the money is there okay that's great at one level,

and it's sad because you have to pay the money.

But if the money's not there they will carry on trying once every three days so that means that if

you are above an overdraft limit for example you'll keep on racking up overdraft fees,

and it's something to be aware of.

The rest of this is all fairly kind of simple at this stage. The bit here around independent advice they

probably put it in just so that, you know, they can tell you they've put it in,

they can point to it if there's a problem in the future but actually really you probably

should take advice. It's a serious thing, guaranteeing someone's loan.

The rest of it is you know I think pretty standard -- if you have a complaint you can complain to them

or to the Ombudsman.

One thing I just like to point out which is a bit unusual is what goes on with credit reference agencies.

So obviously they will check with a credit reference agency before letting you be a guarantor.

What they say is that that won't show up in the credit score of the

credit score of one of the credit reference agencies like your Experian score or your Equifax score.

However that doesn't mean it won't impact your ability to get credit.

Other lenders will see that you are a guarantor and they may take that

into account when deciding to lend to you, so you need to understand that

actually this might impact your ability to borrow in the future

The rest of it I think is all fairly standard so, those are the

key points: understand, you really are on the hook,

they really could take money straight out of your bank accounts and it might impact your credit

but if you're still happy to go ahead by all means do so!