Most times, it is difficult for people to decline to be a guarantor to long term loans because it could mar the relationship. In some cases, it becomes a responsibility that he has to bear for a very long time. Being a guarantor is a big responsibility. Most loans that need a guarantor are long term loans; people with bad credit scores seeking loans should opt for loans for bad credit score.
The Guarantor’s Role
He is someone who guarantees the lender that he will repay the borrower’s debt if he is incapable of doing so. If at any point you wish to drop the role, it is difficult but not impossible. This situation could arise when you discover that the decision you took to be the guarantor for a friend or relative is a bad idea and want to opt-out. You can wriggle out of the situation but will be subjected to tough conditions. If you fail to opt-out and the borrower does not keep to the conditions of the loan, you will also be held liable. This means that the bank can take legal action against you. Also, if you fail to pay up, it will affect your credit score, and you won’t be able to access loans when needed. This is a huge price to pay.
If you take the decision to opt-out, you will have to take your application directly to the lender. The bad news is that the lender has the right to decline your application. If he has been trying to get the borrower to pay, he may not relieve you. When the situation escalates to this point, there are some reasons for which you could be relieved. Click here!
Borrower Taking Another Loan Without Your Consent
If you discover that the borrower took another loan after the original one without your approval, you may ask the lender to relieve you. However, you will not be excused from paying the debt owed on the original amount.
Finding A Substitute Guarantor for The Loan
The lender may consider relieving you if a substitute guarantor for the long term loans is available. However, you have to give the lender a convincing reason concerning your move to opt-out. If they are convinced about the credentials provided by the substitute guarantor, you will be released.
Persuade The Borrower to Pay Back
This looks like an impossible step because you would not have pushed to opt-out if the borrower was following the terms of the long term loans and making payments according to the repayment schedule. But it does not mean that you cannot give it a try. Being a guarantor for the person’s loan means that you both have a close relationship. Give him good reasons to pay back, and you can help out as much as you can. If you have other friends or relatives that can help, you could use the assistance.
Consider Legal Actions
If you offered tangible assets as collateral while guaranteeing the borrower’s loan, the lender could move to sell the property to recover the debt. If the assets are real estates under a mortgage or under construction, you can take legal action on the grounds that the properties have not been fully paid for.
When the borrower does not repay his loan, the bank tags you “willful defaulter.” You could make a case in court saying there were no indications of the borrower defaulting when you agreed to be his guarantor. The fact that the become a defaulter does not make you one too. Learn more details at: https://www.wikihow.com/Write-a-Guarantor-Letter