Guarantor Loans


(Derpa Derp) #1

Before I start this is not about me.

If someone takes out a loan with one of them payday lenders and it is guaranteed by someone else what happens if the person that took out the loan stops paying?

I know that they would go after the guarantor as that is the whole point but what happens to the person that takes out the loan, do they just get away without paying?

I know that it would screw their credit etc but yeah what happens?

Again not about me just a convo I was having earlier.


(Liam) #2

Speaking from a position of ignorance here (time honoured tradition of the internet…), but would assume that the guarantor would have to pursue the debt through legal process?


(Derpa Derp) #3

Ok so the guarantor would then go after the person that took out the loan but what does the lender do to that person also?

I’m guessing they write the debt off against the person that took it out as they have the guarantor to chase?


(Liam) #4

I would expect that the lender would be happy so long as somebody is paying the loan.

I am not a lawyer though - you’d be a fool to take legal advice from me.

Thinking of applying for Michael Cohen’s old post. No experience required!


(Derpa Derp) #5

Yeah I was thinking they don’t really care as long as they get paid, just would be interesting to know what happens to the person that takes out the loan.


(l8n.me) #6

I think this is the key. I would quite expect (speaking from a position of complete ignorance on this topic also) then to not even spend too much time on the debtor at all. They took out a terrible loan because they’ve got no money anyway, their possessions won’t get much at auction, the guarantor is the guarantor because, in theory at least, they’re on a better financial footing, let’s have a quick try with the debtor then just go after them.

As to your actual question of the debtor I wouldn’t have a clue so all these words have been a bit pointless, but I like commenting on things so :man_shrugging:t2:


#7

From my understanding from just about every episode of “Can’t Pay? We’ll Take it Away!” ever:

A guarantor says if they do not pay, I will fulfil their duties to pay the debt. They will often not persue the person themselves but the guarantor for the money and if they don’t pay the money up, the guarantor can also be served bankruptcy notices.


#8

What happened to the debtor would be between the guarantor and the debtor.

If the original contract has been done correctly I wouldn’t think the guarantor would have much legal recourse, though, which is why guarantor loans are so risky for the guarantor and debtor…


(Derpa Derp) #9

So essentially what could happen is someone can take out a loan with a guarantor, stop paying and then let then guarantor sort it out with potentially no comeback?


#10

You would have to make a separate agreement between the debtor and guarantor as far as I’m aware, which basically said any money that the guarantor paid would be repaid within x amount of time of the original debt being paid in x amounts

From my time watching Judge Rinder!


#11

I bet if you look at the figures, defaults on guarantor loans will be lower than normal loans.

I’ll have a look for the figure, but I think its around 5% of the top of my head, compared to 10-15% for other type of loans.