What to do when you cannot repay your Guarantor Loan
A Guarantor Loan is Finance Offered to Those With a Bad Credit Rating
The guarantor is a close friend or relative that guarantees that the debt repayments will be met, should you the main applicant fail to repay.
This is great for people who can afford the repayments on a loan but simply cannot get a loan due to bad credit. The guarantor can’t just be anyone, it has to be someone that you know well and they will have to have a great credit score. If not you will be declined for the loan.
Guarantor loans can be a quick, efficient way to get the finance that you need. However you need to be absolutely certain that you can repay your loan, as failure to do so will mean that the debt is passed to the guarantor, which can put a strain on relationships / friendships. The guarantor is putting their trust in you that you will repay your debts and will not expect to pay your debts for you. They are essentially vouching to the lender for you.
I can’t repay my guarantor loan
If you find that you are in the situation whereby you cannot repay your guarantor loan, you must notify your lender immediately, missing or being late with repayments will only cause further hassle and a bad credit rating.
You then need to contact your guarantor to let them know that you are struggling to make the repayments. It is best to do this prior to any missed or late repayments and before the lender contacts the guarantor directly for payment. Being open and honest with your lender and your guarantor should be your first priority to ensure that the debt gets repaid, as if it is not, then both you and your guarantor will suffer a worsened credit rating.
If you are close to your guarantor they could provide you with a solution whereby they make the repayments on your behalf until your financial situation improves. This is all based on your relationship with your guarantor, therefore to avoid any fall out you need to ensure that you can afford the loan in the first place and allow the guarantor to make the big decision of whether or not to be your guarantor.
Using a guarantor loan correctly can help you to rebuild your bad credit rating, meaning that you will not have to rely on getting a guarantor in the future. Likewise failure to repay your loan will have serious consequences in terms of your credit score and potentially your relationship with your guarantor.