What Happens if Your Guarantor Refuses to Pay?

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Written by Daniel Tannenbaum on May 6, 2021

Updated May 14, 2021

If your guarantor refuses to pay in the circumstances where they are contractually obliged to, the lender will usually take the necessary steps to try recover their funds via the guarantor.

When a guarantor signs an agreement, they are legally obligated to see it through until the loan is paid off in full. See rights of a guarantor for more information.

Being a guarantor for a loan is a big responsibility, and therefore should not be taken lightly. Before agreeing to become a guarantor on a loan, it’s important to carefully consider the following:

  • Do you trust the main borrower will keep up with repayments?
  • Will you be comfortable making the repayments if the main borrower fails to?
  • Do you see yourself being in contact with the borrower long term?

Guarantors should have a good, long-lasting relationship with the main borrower – that’s why many are often a close friend or a family member.

 

Why Would My Guarantor Need to Pay?

Guarantors would be required to pay for the loan when the main borrower fails to keep up with repayments. Many guarantors are often used as a last resort and the lender will usually speak to the main borrower first to collect repayment.

Guarantors are often added to a loan to offer extra security to the lender if the main borrower is unable to repay on time.

Therefore, if the main borrower struggles to keep up with loan repayments, and can no longer pay back the loan, it is up to the guarantor to then pay for the loan.

 

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What Happens if a Guarantor Cannot Pay?

If the guarantor cannot repay as agreed, despite probably having a better than average credit score, the lender will take various steps to collect repayment. This may include offering a more flexible repayment plan and following up for payment each month with emails and letters.

Of course, someone else may be able to step in and pay for the debt on behalf of all parties and this could close the account once and for all.

You may be able to write off the debt if you declare bankruptcy, but this will have a negative impact on your credit score.

Furthermore, you could also speak to a lawyer about claiming compensation on your guarantor loan if you think it was unaffordable for the borrower and the guarantor.

 

Are Guarantors Legally Responsible For the Loan?

Yes, once a guarantor has signed to a loan agreement, agreeing to be the guarantor for a loan, they are legally bound to adhere to the requirements for them laid out in the contract. You cannot stop being a guarantor.

This will typically include, as is the very nature of a guarantor loan, stepping in and making repayments on the loan if the main borrower fails to.

If a guarantor refuses to adhere to the requirements laid out in the contract they have agreed to, the lender may then take legal action. Guarantors are legally responsible for the loan repayments should the main borrower fail to keep up with them.

 

Can You Change Guarantors?

No, you cannot change the guarantor on a loan. This is because much of the reason for approval on the loan can fall on the chosen guarantor meeting the eligibility criteria.

If you were to change your guarantor they may have a different credit history, employment status and affordability, meaning had they been the guarantor to begin with, the loan terms may have differed slightly, or the loan may not have been approved at all.

A guarantor is required to see the loan through to its end, and is contractually obligated to do so.

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