Don’t lose the house by doing someone a favour.
In some cases – usually when a borrower has no credit ‘history’ to back up their assertion that they will repay a loan – the lender will require a guarantor for the loan.
A guarantor agrees to be responsible for the repayments should the borrower fail to meet their obligations.
A common example is a parents being asked to go guarantor for an adult child’s loan.
Guarantors should ensure their guarantee is limited to a set amount and a specific time period and they should always seek the help of a lawyer and financial adviser before proceeding. Guarantors will a close personal relationship with the borrower in particular should make sure they have objective, outside advice.
Think carefully before you agree to go guarantor. Ask yourself whether you really could meet those repayments. It’s not unknown for someone to lose their home over a guarantee they never expected to have to meet.
Before you go guarantor, carefully consider:
- How much is being borrowed?
- How responsible is the borrower?
- How stable is their employment?
- Does the borrower have any other means of repaying the loan should he or she fall ill, be injured or become unemployed?
- Can I afford to repay the total sum of the loan?
If you would like to dicuss your options with one of our experience financiers, give us a call on 1300 547 226.