How do I stop being a guarantor on a loan?
It is difficult to stop being a guarantor on a guarantor loan once all parties have signed the loan agreement and the money has been paid out. More often than not, guarantors will have to stay guarantors until the loan has been fully repaid.
There are a few circumstances in which it might be possible for you to stop being a guarantor:
- Before the loan agreement is completed and the loan has been paid out.
If you change your mind about becoming a guarantor before the loan agreement is completed or before the loan has been paid out, contact the lender. This will stop the application at no extra cost to you or the borrower.
- During the ‘cooling-off’ period.
The borrower has 14 days after the loan is completed to cancel the loan. If they do choose this option, they simply have to pay back any money sent to them within 30 days and the loan is cancelled. If you change your mind about being a guarantor after the money has been paid out, then contact the borrower and discuss this option to cancel.
- If you or the borrower repay the loan in full.
Once the 14-day cooling off period is over then it is extremely difficult to stop being a guarantor for a loan. If you do not wish to have long-term responsibility for the loan agreement, then your best option is to get the borrower to repay the loan in full early. Most lenders allow early repayment, although some will charge a fee. You as the guarantor could also repay the loan in full, and the borrower would then owe you the money.
- If you can find a replacement guarantor.
Some lenders will allow you to be released from your obligations as guarantor if a suitable replacement guarantor is found. However, this is rare because their financial profile will have to match yours perfectly. The lender will want a new guarantor with similar income, credit history and assets to yours. The lender also has ultimate power to accept or reject this application. So, although it is possible, this option is not the best if you wish to stop being a guarantor.