Acting as a Guarantor
Credit Committee sometimes makes the decision that a loan will be granted only if a suitable guarantor can be found. If a friend or family member asks you to act as guarantor for them, please make sure you fully understand the commitment you are making.
Effectively, you are signing a legal document to say that if this person defaults on their loan, you are willing to take responsibility for it. Consider long and hard as to whether you feel this person will keep up repayments, even if their circumstances change.
We have hundreds of cases where Members have, without a hitch, acted as guarantor for each other. Sadly however, we also have many cases where the ‘good Samaritan’ acting as guarantor has been left to pay off a loan taken out by someone else.
Proposed guarantors have to complete a ‘Guarantor Suitability Form’ which requires the disclosure of financial information. The proposed guarantor will also have to agree to be credit searched. Only when the proposed guarantor returns the ‘Guarantor Suitability Form’ and Credit Committee has approved them, can a loan be paid out.
Guarantors should be aware that they have to provide proof of their income and consent to a Credit Search before they can be approved as being a suitable guarantor.