Basically a guarantor is someone who agrees to cover another person’s bill in the event they can’t pay it.
Guarantors are sometimes required when taking out a loan or mortgage, or moving into a rented property, if the person responsible for the bills doesn’t meet income requirements.
For renting, a landlord might also request a guarantor if the tenant has limited renting history, a low credit score or other factors that would deem them at risk of missing payments.
Who can be a guarantor, and what are they responsible for?
The simple answer is – almost anyone.
Often it’ll be a parent – especially for young people renting for the first time or taking their first steps onto the property ladder – or a spouse.
But friends and other relatives can be guarantors too
The basic requirements for being a guarantor are:
- Aged over 18, or over 21, depending on who is making the request
- Good credit history
- Financial stability – a certain amount of savings or income
– Being a homeowner will also make you more desirable as a guarantor, as it shows that you have a way of covering costs if you need to.
– You usually have to live in the UK too.
What the guarantor is legally responsible for can vary depending on what’s written in the guarantee.
In the case of renting, the guarantor is usually responsible for paying rent if the tenant can’t for any reason. They might also have to cover repairs if the tenant damages the property.
In extreme cases, the guarantor might be called on to cover legal costs faced by the landlord due to the tenant.
What happens if the guarantor can’t pay?
If you can’t pay the lender or landlord what you owe, they may turn to your guarantor at this point, if another agreement can’t be worked out.
In the rare event that the guarantor can’t – or even won’t – pay, they could be taken to court. It’s likely that remediation action would be taken before it gets to this point, but the guarantor signs a legally binding contract, so it can happen.
Not paying the debt could also impact the guarantor’s credit history.
Logic Wealth Planning provides independent financial advice in Manchester, Bury, Rochdale, Cheshire, and the surrounding area, but not limited to the region.