How to Protect Your Guarantor
If you have a guarantor loan, then it can be a good idea to make sure that you look after your guarantor. This is because they will be important to you, they are helping you and you do not want to fall out with them over anything to do with this loan. Therefore, there are various things that you can do to help them.
Make Sure They are Aware of How Much They Could Pay
It is very wise to show them how much they may have to pay in full. Explain to them how much they would have to pay each month if you missed a repayment and how much they might have to pay if you missed all of the repayments. Obviously, you will not want to miss any payments if you can help it and you will certainly not want them to pay the whole loan off, but it is wise to let them know what they might need to do. This will allow them to think about whether they will need to budget and plan their spending so that they have this money available if they need it.
Make Sure They Understand How the Loan Works
They also need to be clear on how the loan works. They will need to know that if you miss a payment they will have to make one. They may pay more than you due to any additional charges that are added on if the initial payment is missed. They will also not necessarily be asked for their payment on the same day that the borrower is asked. Therefore, it is important for them to know that information so they can properly prepare for it. It should be in the terms and conditions, but it might be easier to ask the lender to clarify so you have all of the facts that you need.
Come to an Agreement About you Repaying Them
It is a good idea to also discuss with them what will happen if you do miss a repayment. Obviously, they will realise that they will have to make it, but what happens them? You need to discuss whether they will just make the repayment and that will be the end to it or whether they expect you to repay the money to them at some point. It can be good to go into specific detail to find out when they need the money, if they do want it to be repaid. It could be the case that they will want it as soon as possible or that they are happy to wait until you are ready. It is worth having a long discussion about it all. You need to make sure that what you agree is fair to both of you and something that you will both be able to commit to and stick to.
Keep Things in Writing
It is a good idea to write down what you agree with them with regards to repaying and each keep a copy and perhaps even sign it. This might seem a bit extreme but it could mean that things will be a lot better later on. For example, if you miss a few payments and you cannot repay them and they suddenly need some money themselves they may put pressure on you to repay them. This could make your relationship strained as you struggle to get them the money and they get cross with you. If you have an agreement written down, which states that you do not have to repay right away, then this could help you as you could remind them of that and it should take the pressure off you.