guarantoor

John Player

hey all i have yet another question to ask, if someone takes a loan and fails in paying it back by the time its due how does this affect the indemintor/guarnantoor (sp) is the amount automatically deducted from their account on the due date or is it dragged out? iow when do the bank stop asking the person who took the loan to pay back and just take it off the guarn...r?


merci buckets
john player!

Borzoi

They'll try and get it from you first, but it takes a while before they start on the guarantor,.

If you're having problems, go in and talk to them,, banks live in fear of debts buggering off, but if you go in say you can pay a little or, not yet but in six months they'll be a lot happier.

Our man in Havana

Originally posted by Borzoi
They'll try and get it from you first, but it takes a while before they start on the guarantor.

Who do they take to court for not paying? The debtor, the guarnator or both? Would they hold them both liable?

Borzoi

Hmm, usually if they insist on a guarantor, the debtor has very little money/assets/credit history, so there would be little point in taking them to court. In all liklihood the guarantor has something to loose so the bank would probably go after them, but they won't immediately go to court, they'll approach the guarantor first for the money/repayments.

Banks are in it for the money, they'll take the cheapest route to get the most back, remember the longer it goes on, the more interest they're charging.

John Player

called up me branch to find out what it actually ment, have to say they were very helpful, apparantly they take legal action and all costs are incurred by the debitor.

RainyDay

Originally posted by Bond-James Bond
Who do they take to court for not paying? The debtor, the guarnator or both? Would they hold them both liable?

I would expect the bank to go after both the debtor and the guarantor, on the basis of 'joint & several liability'. At a minimum, they would want to register a judgement against the debtor to ensure their credit history is hit.

ur mentor

I hope that you are asking this question in an academic light. If you have a loan and cannot pay it off, then you should get guarantor to clear it. If Banks go to court and they get judgement against you in can have long term ramifications. you will really struggle to get finance for anything- car , bike not to mention a house/home. for a really long time and your guarantor will have to clear bill plus all legal costs plus all usuary interest. Remember most bank loans have a surcharge if loans go into default.
As a result your guarantor wil lbe clobbered by about twice original loan amount and ur credit rating will be thrashed.
Also guarantor probably expects that they may have to clear loan as they probably have some belief in you in the long term. Unless of course they want u to fall on face:D
So don't get them into deeper hole by staying stum Get them into picture and get situation sorted.

pablo21

I have always had a very good credit rating and a couple of years ago I went guarenteed a loan for a family member. Since then I started a successfull business and with out the need for finance I had no needs for a loan but and here's the clincher, this year I decided to start a second company in a different business sector and this one did require financial assistance to get off the ground. So I applied for the loan with my bank who didnt even wait for the approval because our business relationship was so good, that they told me to go ahead and purchase the equipment I needed (over €35K) and they'd sort the details out. 3 days later as the machine was about to be delivered I got a call from the bank saying my loan had been refused!! They were stunned as was I as I dont owe anyone money, all my accounts are healthy, and I have a good investment portfolio. I took me a while to trace the route cause of the problem. I had to send off and get a credit reference from the Credit Reference Board and only then did I discover that my "family member" had been a few days late with every payment, by a few I mean 3 to 5 days max and during a sick period had accumulated 3 consecutive unpaid months but had promptly paid all arrears on the following month! Now I dont konw if you've ever seen a credit reference but they are basic enough but all mine showed was a clean sheet for everything except this loan I had backed which showed as all "1's" for late payments. Now here's the trick bit, if his repayment date had been at the start of the month none of the repayments would have shown as late, but because the due date was the 29th or 30th it imediatley went overdue after a day or two! I have had to spend the last six or eight months pumping money into the credit union to allow me finance this project and my credit rating is still and will be stained for the next FIVE YEARS!! All because I helped somebody out. I cant get a mortgage unless the credit union will fund it for me. I have a full time job that gross's over sixty K and my company earns me as much again and I cant get a loan from anywhere other than the credit union!!!

The moral of the story is be extremely careful if you decide to help someone out in this way and if you are the one being helped please consider the effect your payment record can have on the person who's helping you out!! And thats my rant over.............................

shoegirl

The debtor is liable for the debt. However, if the loan goes into arrears the credit reference of the guarantor will be hit.

Primarily the debtor will be chased for the debt. If this fails, and once all other channels have been used, the creditor will start on the guarantor. Its usual for student loans and overdrafts to have a parent as guarantor, however once these are paid off and if you then later on increase or make a change to your overdraft then only the debtor is liable.

If the debt is not paid the consequences for the debtor as far as credit rating is concerned will apply also to the guarantor.

I would advise the guy whose credit rating has been stung on account of his guaranteeing somebody's loan to speak to his bank manager and bring a copy of the credit reference along. If his income really is over 120k and its clear that the loan was not in his name then its possible that the bank may be able to override the refusal. Wouldn't guarantee it though, the banks are beginning to panic on consumer debt due to soaring levels of debt problems in the UK at the moment (almost 25% of UK borrowers are facing payment problems due to overborrowing).

Also think twice before guaranteeing a debt. It might sound mean, but be particularly wary of "close" family and friends.

spongebob

Originally posted by pablo21
The moral of the story is be extremely careful if you decide to help someone out in this way and if you are the one being helped please consider the effect your payment record can have on the person who's helping you out!! And thats my rant over.............................

Ouch, next time I'll pay the loan and get the 'debtor' to pay into my account in case i have to chase their ass, you can ask for a note to be put on your file , I hear they are useful in some cases.

In this case the 'debtor' may not have left enough time for 'their' paycheques to clear it being their first loan or somethig, they should have paid on the 4th or 5th of the month instead.

If you go guarantee note that it is "Term of This One Loan Only" with a/c to be closed immediately on clearing of balance.

Mate guarantees sprog a college loan around 1990, sprog paid it back in full. Sprog wanders into bank again c 1993. Sprog gets loan with no request for guarantor this time, wee hee.

Sprog gets in pickle, mate gets phone call from bank and has to sort out loan.

It turns out the bank had this "old" loan account live on the system with a £0 balance that they reactivated for sprogs second loan, my mate had guaranteed ALL loans on this account for ever it seems.

Watch it!

M

shoegirl

Well thats interesting, I would certainly get something on my credit record in that case. As for the idea of asking somebody to pay you directly, I wouldn't recommend that either as then you are 100% liable.

A friend of mine took out a 16k loan for a "friend." The friend absconded, leaving my friend with a debt of €16,000 he was 100% liable for. Never took out a loan in his life. He was appalled to realise that there was nothing he could do but pay it.

I'd recommend only guaranteeing for sons or daughters and only for small amounts. I'd also make it clear to the bank this is only a once off. Of course in these trigger happy days of lending, I wouldn't totally trust them to agree to that.

spongebob

Most I'd guarantee is €2 or €3 k , after that its a share of the business

M

De Rebel

Originally posted by pablo21

The moral of the story is be extremely careful if you decide to help someone out in this way and if you are the one being helped please consider the effect your payment record can have on the person who's helping you out!! And thats my rant over.............................

Pablo21

Have you actually sat down with a Bank Manager (not a yellow pack) and discussed all this in the ontext of a specific loan? I know of several people who have had worse stains than that on their reccords (i.e. ones which were actually their fault) and who still managed to get loans by explaining what it happened, and proving that it wouldn't happen again. The credit bureau reference is one aspect of the decision makin process, but only one aspect. If your case is as you say, and if you lay it out as you have, and if you track record is a squeaky clean as you say, then any reasonable man, and most bank managers are reasonable men, should give you a fair hearing.

spongebob

If you and the Bank Manager could agree a wording then you should send a joint leter to the Credit Bureau or 2 copies of the same letter.

Lots of loans are sorted out by "Back Office" who cannot be approached as can the manager. If "Back Office" says no then the local manager often has difficulty overriding them.

It does follow that an inexperienced borrower could have mistimed the out date for their payments, all of my key payments go in the second week of the month, c the 10th, in case there is a ballsup at the end of the previous one and something needs to clear such as an expenses cheque , 3 working days. That date is based on experience .

M

pablo21

Thanks for the advice guy's. All your points are good ones but I did try everything you said. Like I mentioned in my post I circumvented the problem by using a credit union for my own financing and I also paid the loan off for the family member I mentioned so I'm currently getting an amendment added to my credit profile to reflect this and hopefully this should leave me cool for all future financing! My local branch were 150% supportive and even offered to raise the money by opening up a few accounts and max'ing loans and O/D's on each one! Extremely sound people, but the venture I had planned required agri/ equipment finance and can not be approved locally so I decided to hold off and raise it a different way. Anywho the moral of the story remains the same! I didnt think twice about offering my support when asked but I'm older and wiser now!

Richieh

Originally posted by De Rebel
Pablo21

If your case is as you say, and if you lay it out as you have, and if you track record is a squeaky clean as you say, then any reasonable man, and most bank managers are reasonable men, should give you a fair hearing.

Absolutely. An ICB is part of the application process and in the event of a 'bad bureau', a lenders system will "make loud noises". However, any bank manager can make a recommendation to the lending division and can usually swing any decision the other way.

In the case of guaranteurs, most banks won't consider them any longer unless the 'guaranteur' is actually a joint applicant on a loan, in other words, all income details will be required for the prospective guaranteur. Some lenders won't insist that applicant be named on the title deed and so getting rid of any prospective stamp duty liability. In a lot of cases, the minimum level of income to even be considered in such a scenario is €50K.

Talk to your bank manager. If he/she values your business, they'll give you a fair hearing.

Good luck!!

sixtysix

why not talk to the banking ombudsman
the practice of penalising both the lender and the guarantor by means of a bad credit rating seems almost perverse.

spongebob

Absolutely, have you tried this Pablo21 ? While the person who got the loan has to sort their own problems out you should not be penalised for 5 years over it.

You were a guarantor of LAST resort not of monthly resort. They are penalising you because of Micro issues such as late payments flagged 1 on the record. You were never called upon to discharge YOUR liabilty as guarantor, you never refused to do so or delayed the settlement once asked to settle.

Therefore YOU never missed any performance target set by the bank for you as guarantor so YOUR record should be perfect.

Classic ombudsman stuff IMO

Off with ya and good luck.

M