Guaranteeing a loan for a family member
Discussion
I have offered to guarantee a loan for a family member. £13,000 over 60 months @ 7.9% which is about £260 a month.
I know they are good for it but have never heard of a bank offering this, has anyone got any experience?
Or is the only alternative for me to take out the loan and for them to pay me back?
Any advice?
Cheers
I know they are good for it but have never heard of a bank offering this, has anyone got any experience?
Or is the only alternative for me to take out the loan and for them to pay me back?
Any advice?
Cheers
Edited by iAlex on Saturday 11th December 13:20
Trust doesn't come into it? If you say so and if you can afford to write off £13k then others might agree with you, in which case go for it 
However you seem to suggest it's not something that easily kissed goodbye.
Personally any relative asking for £13k having been turned down by a bank or banks would raise serious concern and suspicions for either a loan or as guarantor but ultimately only you know your family well enough to make the call.
However you seem to suggest it's not something that easily kissed goodbye.Personally any relative asking for £13k having been turned down by a bank or banks would raise serious concern and suspicions for either a loan or as guarantor but ultimately only you know your family well enough to make the call.
Thought long and hard and decided that knowing that they are good for it, I am willing to.
Appreciate the issues others who don't know the situation would raise though, but honestly, I don't have an issue.
I just wanted to know if anyone had any experience with guaranteeing loans and if it was possible?
Appreciate the issues others who don't know the situation would raise though, but honestly, I don't have an issue.
I just wanted to know if anyone had any experience with guaranteeing loans and if it was possible?
It's not always the case but generally lending family / friends sums of money can lead to a recipe for disaster.
I've learnt the hard way by lending my mother a large sum of money 4 years ago only to have her totally shaft me and I'm never likely to see a penny of it ever again. Needless to say I no longer speak or have anything to do with her.
You circumstances may change over the period of the loan and you may find you need the money. The money I leant was for a deposit for a house.
I've learnt the hard way by lending my mother a large sum of money 4 years ago only to have her totally shaft me and I'm never likely to see a penny of it ever again. Needless to say I no longer speak or have anything to do with her.
You circumstances may change over the period of the loan and you may find you need the money. The money I leant was for a deposit for a house.
So presumably if they default on the payments for whatever reason, loss of job, illness etc, the debt then becomes yours. Also depending on the terms you would be liable for the interest till the end of the term.
Be very careful, there are endless threads here where people have lent money to relatives/friends and it's ended badly.
Be very careful, there are endless threads here where people have lent money to relatives/friends and it's ended badly.
I'm guessing from the posts that you've edited your original post which presumably mentioned more about the trust aspect but that you now consider that there are no issues about trust?
Practically, if you act as guarantor you may find yourself liable for the whole amount of the loan plus any legal fees incurred. If your relative was to default on the loan, you may not hear anything about it until significant additional costs have been incurred by way of default charges, penalties etc. and until the lender is demanding full payment of the entire amount.
If I really felt the need to be involved (and it'd have to be a damn good reason) then I'd probably borrow the money myself so I could control the loan account and so that I would know immediately if the family member stopped making payments.
Practically, if you act as guarantor you may find yourself liable for the whole amount of the loan plus any legal fees incurred. If your relative was to default on the loan, you may not hear anything about it until significant additional costs have been incurred by way of default charges, penalties etc. and until the lender is demanding full payment of the entire amount.
If I really felt the need to be involved (and it'd have to be a damn good reason) then I'd probably borrow the money myself so I could control the loan account and so that I would know immediately if the family member stopped making payments.
Piglet said:
I'm guessing from the posts that you've edited your original post which presumably mentioned more about the trust aspect but that you now consider that there are no issues about trust?
Practically, if you act as guarantor you may find yourself liable for the whole amount of the loan plus any legal fees incurred. If your relative was to default on the loan, you may not hear anything about it until significant additional costs have been incurred by way of default charges, penalties etc. and until the lender is demanding full payment of the entire amount.
If I really felt the need to be involved (and it'd have to be a damn good reason) then I'd probably borrow the money myself so I could control the loan account and so that I would know immediately if the family member stopped making payments.
I edited the original post so as to give less cause for debate on the trust issue, it didn't work though.Practically, if you act as guarantor you may find yourself liable for the whole amount of the loan plus any legal fees incurred. If your relative was to default on the loan, you may not hear anything about it until significant additional costs have been incurred by way of default charges, penalties etc. and until the lender is demanding full payment of the entire amount.
If I really felt the need to be involved (and it'd have to be a damn good reason) then I'd probably borrow the money myself so I could control the loan account and so that I would know immediately if the family member stopped making payments.
I guess I could take it in my name and that would be the better option. They could then pay me rather than the bank by standing order?
They may be good the money now to afford the repayments, but as already said, 60 months is a long time. If they currently have a mortgage and interest rates go up will they have the money then?
You would be more in control if you took out the loan,yet if they start to struggle with repayments, they'll see their other commitments to banks, loan companies bills etc as a priority to paying a relative back.
You would be more in control if you took out the loan,yet if they start to struggle with repayments, they'll see their other commitments to banks, loan companies bills etc as a priority to paying a relative back.
TBH I'm not sure there is a better option other than your family member borrowing money in their own name without needing a guarantor. I appreciate that you don't want to deal with the issue of trust so I'll leave that alone.
However, either with you as guarantor or with you borrowing the money, how can you be confident that your family member can continue to pay the loan over the whole of the loan period? How would they deal with illness or unemployment? They might not choose not to pay but they might not be able to?
If I felt it was necessary (and I guess I'd be talking about funding for medical treatment or something absolutely vital) I would take the loan in my own name so that I had control of it and knew immediately if there was a problem with the payment being made. This loan will effect your credit rating and, should you wish to borrow in the future, it will be taken into account when a lender calculates what they would lend you.
It's an absolute minefield and for a large amount of money over a long period, personally I think you'd be barking mad to get involved.
However, either with you as guarantor or with you borrowing the money, how can you be confident that your family member can continue to pay the loan over the whole of the loan period? How would they deal with illness or unemployment? They might not choose not to pay but they might not be able to?
If I felt it was necessary (and I guess I'd be talking about funding for medical treatment or something absolutely vital) I would take the loan in my own name so that I had control of it and knew immediately if there was a problem with the payment being made. This loan will effect your credit rating and, should you wish to borrow in the future, it will be taken into account when a lender calculates what they would lend you.
It's an absolute minefield and for a large amount of money over a long period, personally I think you'd be barking mad to get involved.
I would guess the bank sees them as being ok to service the loan, as I expect you are. He/she is probably a little light on assests.
Car loan ? the car will depreciate faster than the outstanding balance, so the bank wants some extra protection and the loan officer wants to keep his job.
Is it car you would like to own? because you could own it ? often the best way out, before default int kicks in. Pay off and sell, worst case scenario.
If you do guar it, ask for a lower int rate as it is now better secured
Car loan ? the car will depreciate faster than the outstanding balance, so the bank wants some extra protection and the loan officer wants to keep his job.
Is it car you would like to own? because you could own it ? often the best way out, before default int kicks in. Pay off and sell, worst case scenario.
If you do guar it, ask for a lower int rate as it is now better secured
Only you know the situation re the trust issue.
Many moons ago, I posted about transferring a small amount of credit card debt from my girlfriends card onto my own, in order that she was able to pay back the debt at the 0% that was being offered to me, instead of having half her payments swallowed in interest. The general consensus was that this was a very bad idea and the advice from fellow PHers was to not enter into this.
I went against the flow and did it on the basis that the worst case scenario I'd have to write off that amount which I could afford to do.
As it happened, everything went to plan and she was able to pay off the debt quickly. We subsequently moved in together with no debts (this was the aim) and are still together four years on.
Many moons ago, I posted about transferring a small amount of credit card debt from my girlfriends card onto my own, in order that she was able to pay back the debt at the 0% that was being offered to me, instead of having half her payments swallowed in interest. The general consensus was that this was a very bad idea and the advice from fellow PHers was to not enter into this.
I went against the flow and did it on the basis that the worst case scenario I'd have to write off that amount which I could afford to do.
As it happened, everything went to plan and she was able to pay off the debt quickly. We subsequently moved in together with no debts (this was the aim) and are still together four years on.
I simply wanted to ask if being a guarantor on a standard loan from a high street bank was possible as I've never heard of it being done.
I am certain they are good for it and if the worst did happen then I could afford to cover the payments, if I weren't able then I obviously wouldn't be considering it.
It's not a loan for a car but to consolidate other existing debts which were racked up whilst ill.
Current outgoings are £600 a month and from what I can see whilst she isn't struggling hugely, she's making no inroads into the debt due to interest.
So this would leave an extra £350 in her pocket a month and would see a definite route away from the problem.
I am certain they are good for it and if the worst did happen then I could afford to cover the payments, if I weren't able then I obviously wouldn't be considering it.
It's not a loan for a car but to consolidate other existing debts which were racked up whilst ill.
Current outgoings are £600 a month and from what I can see whilst she isn't struggling hugely, she's making no inroads into the debt due to interest.
So this would leave an extra £350 in her pocket a month and would see a definite route away from the problem.
The only way in which you can do this is if you are absolutely, positively prepared to gift this person with £15,600 (£13k + interest). She has "racked up" debt before, for whatever reason, and so if she falls seriously ill again in 6 months time (hope not) then you're still potentially the £14k balance down.
If you're fine with that then do it, but if you can't face that financial outcome, let alone the trust/relationship sid of things, then don't.
She's been refused the loan because she's got a very poor credit history. Granted things are tighter now than a couple of years ago, but the banks' sole aim in life is to make money, and if they've decided not to on this occasion, there's a very good reason, and her sub-prime status may fly back in your face.
If you're fine with that then do it, but if you can't face that financial outcome, let alone the trust/relationship sid of things, then don't.
She's been refused the loan because she's got a very poor credit history. Granted things are tighter now than a couple of years ago, but the banks' sole aim in life is to make money, and if they've decided not to on this occasion, there's a very good reason, and her sub-prime status may fly back in your face.
Edited by C8PPO on Saturday 11th December 22:43
Gassing Station | Finance | Top of Page | What's New | My Stuff