Can I Stop Being a Guarantor for a Loan?

Stick man standing at a crossroads

Once you have signed up to be a guarantor, is there any way out?

Should you wish to opt out of your responsibilities as a loan guarantor, you will have to approach the lender directly with an application. Unfortunately, the discretion is solely dependent on the lender whether or not it will let you go.

However, there are a limited number of circumstances under which they may consider absolving you of your responsibilities as guarantor of the loan.

1. An additional loan is granted without your consent

If you find that the borrower has taken another loan with the same lender without your knowledge or consent, you can contact the lender and ask them to consider relieving you of your guarantor responsibilities due to a significant change in circumstances.

However, you will still likely be liable to repay the outstanding on the original amount sanctioned.

2. You find a suitable replacement guarantor for the loan

If your circumstances change, it could be worth approaching your lender with an application for a release from your obligations if you have found a suitable substitute guarantor for the loan.

If the lender is 100% certain that the credentials of the substitute borrower are suitable, they may consider allowing the swap to be made.

Please Note - This decision is solely at the discretion of your individual lender.

Amigo Loans, for example, will only allow the guarantor to be changed in the period between the loan application being agreed and the money being paid out

For more on this, please click here.

3. Get the borrower to repay the loan in full

The only guaranteed way to remove your responsibilities as a guarantor is for the borrower to repay the loan in full. The good news here is that the majority of lenders do offer the chance to make early repayments in full.

It may be the case that the borrower actually has the funds to make an early repayment in full but had intentions of repaying their entire debt within the stipulated time frame.

14 day cooling off period

Many guarantor loan lenders provide a 14 day cooling off period which runs from the moment the money is transferred to the account of the loan guarantor. Should you wish to cancel the loan agreement, you will be allowed to return the money to the lender (along with any payable interest) and the loan agreement will cease.

For example, please see -

If you or the Guarantor change your mind either of you can withdraw from the agreement. You need to let us know within 14 days (beginning the day after the day on which funds are released).

If you do withdraw you will have to pay us all of the credit advanced (the total amount borrowed) within 30 days of giving us notice of withdrawal. This must be paid to us by cheque, bank transfer or debit card. Full terms & conditions are provided on the loan agreement.

Please Note – If you transfer the money from your account to the borrower in the 14 days and then wish to cancel the agreement, the borrower would obviously have to agree to return the money to you. Should they choose not to do this, the 14 day period will lapse and you will still be contractually obliged to fulfil your role as guarantor.

No proof of loan agreement

One final avenue that has often been explored by borrowers and guarantors to remove themselves from the loan obligations is a claim that they do not have a copy of the loan agreement.

Assuming this has been signed and everything has been completed correctly at the time of making the original application, so long as the lender has a copy, the agreement will remain legally binding.

Legal issues

Should you believe that anything irregular has taken place during the application process, contacting the Financial Ombudsman will help to provide free legal advice on any available options.