What happens if your guarantor refuses to pay?

May 21, 2019

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What happens if your guarantor refuses to pay?

What happens if your guarantor refuses to pay?

If your guarantor refuses to pay back the guarantor loan, they are breaking the contract they have signed, and legal action can be the next step as a result of a lack of payment.

Why would a guarantor need to pay?

In the event that you are unable to pay back your guarantor loan, the terms and conditions of your contract state that the named guarantor of your loan makes the repayments on your behalf, as well as interest that has incurred.

Your guarantor will only be required to step in and make payments in the above circumstances.  In terms of the reasons why you may not be able to pay (lenders have strict regulations in place these days to ensure they are sensibly lending to borrowers, such as by implementing affordability checks before giving approval for a loan) it could be as a result of unforeseen circumstances, such as an emergency, or an unexpected bill.

What if the guarantor is unable to pay?

Of course, there is a difference between a guarantor being unwilling to make repayments, and simply not being able to make them in the first place. In this latter scenario, what happens next?

Usually, this is unlikely to occur, because reputable lenders always make sure that stringent affordability criteria has been applied before approving a guarantor, in order to reduce the risk of such situations happening in the first place.

Nevertheless, like with the main borrower, it can sometimes be the case that a person’s financial circumstances can change overnight, or over a very short period of time completely unexpectedly.

If a guarantor cannot make payments if asked to, then the lender as a first step will look at investigating as to why this has happened initially, as well as work alongside the guarantor in question in help to find a solution.

The lender will typically contact the guarantor and the borrower in order to readdress the situation in a manageable way.

 

 

 

 

 

 

What if my guarantor chooses not to pay?

In the event that your guarantor is able to technically pay, but decides not to when they have been called upon to do so, then they are breaking the contract that they signed to with the lender and borrower.

If the borrower is unable to pay, it is the guarantor’s legal obligation to pay back on their behalf.

The first step taken by the lender will be to try and contact the guarantor. This may be by phone, email or letter.

If the guarantor does not make repayment when these are due, it is possible for the lender to take into consideration collateral that was provided in the contract. Typically, lenders will require that the guarantor is a homeowner, so that the property acts as collateral.

The guarantor is always made aware of the severity of the issue at stake, prior to legal action being taken if they ignore the lender and refuse to pay.

A pre-court action warning letter is usually the beginning of the court proceeding, which will then start 14 days after, if the debt has not been paid back within this time frame.

If no payment is made, the lender has the legal right to start a court order in order to retrieve the debt.

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