Would you be a guarantor for a member of your family?

[gavroche]

Last Christmas , one of my grandson asked me to be his guarantor for a £2000 loan . At first, I reluctantly agreed but then changed my mind so I lent him the money and he agreed to pay me back £200 a month. All was fine for the first 5 months as he paid me on the dot. Then he stopped paying and has not paid for the next 4 months until today when I asked him to restart. He put £100 in my account today.
Considering his trak record, I am glad I didn't go ahead with his bank loan and never will now.

 

[Bonefish Blues]

I have. Fortunately it turned out OK, but I was deeply annoyed to be put in that position (where the child's own parents couldn't act as Guarantors because of their own financial irresponsibility)

 

[T4tomo]

I've guaranteed all my kids student digs rental agreements.

I'm leasing my daughters car, as she started her lease before she started her job after graduating, so technically had no income so couldn't get credit, she has a standing order into my account to cover the monthly lease cost.

Did you every have the conversation with grandson to ask why he has stopped?

 

[I like Skol]

Unlikely. Family or not, people that rush into credit debt and require guarantors are often not the best at managing their finances.

Everyone is different and each situation unique, but IMO a more valuable assistance might be to help them wait a while until they can afford the necessity, or show them that they need to rein in their expectations.

 

[Pale Rider]

Last Christmas , one of my grandson asked me to be his guarantor for a £2000 loan . At first, I reluctantly agreed but then changed my mind so I lent him the money and he agreed to pay me back £200 a month. All was fine for the first 5 months as he paid me on the dot. Then he stopped paying and has not paid for the next 4 months until today when I asked him to restart. He put £100 in my account today.
Considering his trak record, I am glad I didn't go ahead with his bank loan and never will now.

At least you've got 1,100 quid back with a fighting chance of getting the rest.

 

[DCLane]

I've been asked to be, but refused as there were reasons the individual needed a guarantor. And I wasn't happy with the terms given they hadn't changed their behaviour from previous financial irresponsibility. It proved a sensible decision: the guarantor they eventually got has had to pay back the loan in entirety themselves.

For my own children I probably would, but both seem to be very financially responsible. We've taught them to manage money from a young age, with their own bank account & debit card from 11. My eldest, now 21, manages his finances better than I do.

 

[welsh dragon]

My dad did unfortunately and he never got his money back. The bank put a hold on his property when he wanted to sell it. The bank took what was owed at the point that the house was sold and he took possession of the new one.

It was a shoot thing to do to a pensioner (or anyone for that matter)

Never stood as guarantor but lent to my son knowing he might never be able to repay it. And lent to a grandson for the insurance on a motorbike that he repaid in full.

 

[IanSmithCSE]

Good morning,

I have been following the Amigo Loans descent into financial meltdown and there was one relevant thing that stood out to me, along with a couple of irrelevant things.

In very many cases the guarantor didn't expect to have to pay and really resented it when required to so, this assumption seems to have been passed on two assumptions

1. The person taking out the loans wouldn't miss payments
2. Anyway if a few payments were missed it didn't matter as the guarantee would only be called on as a last resort.

The problem was that Amigo called on the guarantor very quickly, as soon as one or two payments were missed.

From an external responsible leading perspective this was the right thing to do, it stopped the loans getting totally out of control with interest being added to interest and missed payment fees.

By the sounds of it in the OPs case had the loan been with Amigo rather than from his own money, he would have been called on to make most of the loan repayments.

But what happened in the market overall was the guarantors then acted like spoilt children when Amigo asked them to honour it, they were more Consumer Rights aware and went to the regulators and said the loan should not have been made as the repayments were not affordable.

Completely stepping over the fact that the borrower asked for loan and the guarantor agreed to make missed payments, after all there was no obligation on the guarantor to make the offer.

I know that the next sentence may attract some derision but; So if anyone does decide to be a guarantor then being called on to honour that guarantee may actually be a sign of a responsible lender.

I don't want to start an Amigo Loans debate on this thread, they made a big mistake in that they started to lend too large amounts of money, sums that could never be paid back, they went from lending a few hundred pounds to thousands and then to large multiples of thousands. APRs can sometimes be misleading, there is nothing too badly wrong with a 50% APR on a £300 loan repaid over three months, on a £10K loan its's just absurd.

Bye

Ian

 

[Ming the Merciless]

No. I've leant money before and trying to get it back was like getting blood out of a stone. The member borrowing is not concerned about paying you back on time.

 

[Alex321]

We have done so for rental agreements when our kids were students, but not for loans.

 

[bikingdad90]

If the borrower is in need of a guarantor I would be pointing them to a credit union which makes loans on a much more affordable basis with lower APR’s and away from the lender they are approaching.

 

[I like Skol]

Whatever happened to living within your means and only buying what you can afford?

I have used debt, as do most people, but this has been minimal. A mortgage is the main one, but kept this conservative to try and keep payments and period down. Also used sizeable personal loans to buy vehicles for business use when I was operating as a sole trader, but this was only after several years of trading and confidence in my ability to service the loans.
Other than this it has, from memory, been restricted to short term interest free credit where the money has been sat in my bank account anyway.

The benefit of this financial lifestyle is that throughout my life I have kept more of my earnings for myself rather than continually paying a slice of interest to the loan companies and as a result my money has gone further and the cumulative effect is actually quite significant in the long term.

Perhaps more people should try this approach?

 

[Drago]

Nope.

The only loans i ever had were mortgages - short term lack of material gratification eventually led to long term financial independence and security. It takes only determination and discipline, two attributes that are sadly lacking in society today.

If my sprogs want to ignore my advice then thats absolutely fine, just don't expect me to facilitate it.

I have lent money directly to my lasses over the years. Those that paid back dutifully and on time often got let off the final few payments as reward for their dilligence and honour - those that didn't (my second daughter) instead got threats for me to come round and take possession of the item they had used my money to purchase, upon which they paid up. Those that were good got the carrot, those that weren't were threatened with the stick.

 

[mustang1]

Apart from my own kids, for any one else, no way.

 

[I like Skol]

Apart from my own kids, for any one else, no way.

Not even for my own kids automatically! They both seem pretty sensible and the oldest has just left home and started work so may soon find himself wanting to buy 'stuff' but I hope/expect they will follow my example and be prudent (which is not the same as tight!).

If they do ever ask to borrow money or require a guarantor then they will need to justify the need for this, and 'I want it' or 'It'll be really nice to have' just won't cut it.