Do guarantors have rights?
The simple answer is, is that yes, guarantors do have rights, but that the nature of how these work are complicated. Nevertheless, even if they are, it is vitally important you are aware of what rights you have and do not have, prior to signing up to become one, as it may have significant financial complications for you in the event that circumstances change.
You control the money given
When you have been accepted as a guarantor on behalf of the main borrower, the lender places this loan directly into your bank account and not the main applicant. At this stage, you will be provided with a two-week cooling-off period by the lender, giving you the chance to change your mind if you so wish. After this period, you will have a legal responsibility to make repayments in the event that the main borrower defaults on their loan repayments. This is the main responsibility of the guarantor.
Being able to control what happens to the loan money (you have two choices, send it back within the two week cooling off period paying no additional charges, or you can decide to give the money directly to the borrower) is an important right that the guarantor has. It means that if you are perhaps having doubts over the main borrower’s ability to afford the loan, you can return the amount, or you may decide to keep the cash and provide it to the person in stages instead, in order to help manage their cashflow more effectively and their cashflow.
You can delay payments
It may be possible for you to delay loan repayments if need be (as a result of the main borrower becoming unable to pay back the loan themselves). This is because all lenders will try every single avenue before contacting the guarantor (such as emails, letters, and calls to the main borrower) in order to collect the payment, as this is considered to be the last resort.
If you end up being contacted by the guarantor lender, you will be offered forbearance and flexibility (providing that the lender in question is regulated), which means you can agree on affordable monthly repayments.
Can I stop being a guarantor?
No, it is not possible to stop being a guarantor if you have already co-signed the loan agreement with the main borrower and the two week cooling off period has now passed. This is because the fundamental reason as to why the main borrower was accepted for the loan was due to your creditworthiness (for example, due to your homeowner status or strong credit rating).
The only possible way for you to no longer be a guarantor is simply for the main borrower (or you) to pay off the full balance of the guarantor loan.
Consequently, you should always carefully consider the responsibilities that you may incur as a guarantor if someone has asked you to become one. It can have financial implications that may impact your credit rating and finances if you do not abide by the contract you signed.
