What If Your Guarantor Refuses To Pay?



What If Your Guarantor Refuses To Pay?

If a guarantor refuses to repay the loan, the debt will still be outstanding and it could lead to added fees and impact to the credit score of the guarantor.

When co-signing a loan agreement, the guarantor agrees to cover any outstanding repayments and based on their income and credit rating, they should be in a financial position to do so.

If the guarantor refuses, maybe because they cannot afford it or do not want to, they are still legally involved and plans will need to be made to ensure repayment.

What if my guarantor cannot afford to pay?


  • A new payment plan may be mutually agreed on
  • It could impact their credit score
  • Charges could be temporarily frozen


Guarantor lenders carry out an affordability check before approving the loan to ensure they can pay the money back if required.

In the majority of cases, the guarantor loan is approved on the basis of the nominated person’s creditworthiness, not the main applicant.

However, if an unexpected financial changes occur to the guarantor’s financial situation, different courses of action may be taken.

The guarantor should always inform the lender as soon as possible about their change in circumstances, if they have initially been contacted by them to pay on behalf of the main applicant.

This could see a new more affordable payment plan arranged, with a longer loan term and charges frozen on a temporary basis to avoid mounting debt. 

What if my guarantor refuses to pay?


  • Legal action may be taken
  • Contact attempts are made before going to court
  • The lender may stake a claim in their property


Legal action


If the guarantor chooses not to pay the guarantor loan when requested, legal action may be taken by the lenders. This could start with a formal letter before a court hearing as a potential last resort.

When signing a loan contract the guarantor enters a legally abiding agreement to pay the loan if the main applicant cannot.

Contact attempts made


Nevertheless, legal action would only be taken if attempts to contact the nominated guarantor have failed. The lender will contact them by phone, letter and email to inform them that they need to pay, over a specified period of time.

If all these contact attempts all fail, then the next stage is legal action.

The first part of this process involves sending a pre-court action warning letter to the guarantor. It states that they have 14 days to clear the debt before the lender will start a court order to collect the debt.

This may result in the guarantor being forced to pay through a court order.


Stake a claim in their property

If the guarantor is a homeowner, which is a requirement for some guarantor loan companies, the lender may claim a stake in their property.

The guarantor’s property is a valuable asset and should increase in value in time, and it is possible that the lender can have a claim in the property if it is sold one day or if the guarantor dies.

This has occurred when the guarantor has died and there has not been any funds allocated to take repayment. It is a rare and extreme case, but it can happen.

What can I do if I am a guarantor?


Ideally, you need to come to an arrangement and try get the account closed as soon as possible. It is worth speaking to the original borrower and finding out why they cannot repay and maybe there is a way that you can come together to clear the debt and close the account.

It is best to speak to the guarantor lender and if you can explain your situation, you may be able to organise an arrangement to pay which is more affordable and will help clear the loan without any added fees or impact to your credit score.