How to remove a guarantor

If you have had a lease guarantor on a rental agreement and are wanting to remove them, there are some different situations where they can be removed.

Before The Lease Is Up

In some instances, depending on the landlord, if you have paid half of the lease on time, removing the guarantor might be possible. Bring proof to your landlord to verify that you still work the same job and he might take a chance with you. Be prepared to be turned down, as there was a reason a lease guarantor had to be added to begin with.

When The Lease Is Up

If you had come to the end of the lease, and payment was made on time for every month of the lease, there is a good chance a new lease can be drawn up without a guarantor. If the landlord can see that the payments were made with your money and that you had set a good payment history with him, it is unlikely that he will require a guarantor for another six months or year. When having a guarantor on the lease, the best way to be able to have him removed as soon as possible is to set a good payment record with the landlord.

While there are some instances where a landlord might be trusting enough to remove a guarantor, more than likely the guarantor will remain on the lease through the length of the lease. They required a co-signer for a reason, and while it isn’t impossible, it is very unlikely that he will change his mind.

How to remove a guarantorAre you ready to remove the guarantee on your home loan?

If you have made consistent repayments to your mortgage and have significantly reduced the size of your loan, you may be able to remove your guarantor.

It is recommended that you do this as early as possible so that your guarantor is not put at any unnecessary risk.

Once the guarantee is removed the lender will just rely on your property as security for the loan.

So how soon can you remove the guarantee?

What are the conditions that you will have to meet to have it removed? Please read on to find out more.

When can I remove the guarantee?

There are a variety of things that will need to be considered before your guarantee is removed. The first thing is your loan amount.

Firstly, you have been able to borrow 100% without providing a deposit, because of the guarantee.

Therefore it makes sense that when a portion of the loan has been repaid, you will no longer need the guarantee, as the risk of your loan has reduced.

This also applies if the value of your home has increased. Just as in the above situation, the percentage of the property value that you owe, is lowered.

How long does the guarantee last?

The guarantee will continue until the lender approves your request to remove it.

You should expect the guarantee to be in place for roughly five years before you are in the financial position to remove it.

However, this can vary significantly depending on your circumstances and how quickly you pay off a portion of your home loan.

What are the conditions you have to meet?

The policy of most major lenders and financiers is largely the same when it comes to guarantor loans.

You can only remove the guarantee once you have satisfied these general requirements:

  • Your repayments must have been made on time, every time, for the last 6 months.
  • Your loan must be for less than 90% of the value of your property. This can be from a combination of extra repayments and capital growth in the value of your property.
  • Your credit history, income, employment and all other aspects of your situation must meet the lenders policy.

Please note that each lender has specific guidelines that may vary slightly from those listed above.

For this reason it is best to contact our mortgage brokers on 1300 399 056 or enquire online to get more detailed advice for your situation.

Will I have to pay Lenders Mortgage Insurance?

If your mortgage is less than 80% of the value of your property at the time you remove the guarantee, you will be exempt from paying Lenders Mortgage Insurance (LMI).

This is because loans that are at 80% LVR are not considered high risk.

For this reason, it is recommended that you keep the guarantee until you have paid off at least 20% of your loan.

It lowers the risk of lending and will save you money!

What is the process for removing the guarantee?

Removing the guarantee is quite simple and in some cases, you will only be required to sign a form. However generally it will involve a re-structuring of your entire existing loan.

In that case, the following steps will apply:

  • Step 1 – contact your lender so that they can assess your situation.
  • Step 2 – the lender will usually require you to get your property valued and provide them with the figure.
  • Step 3 – the lender will confirm that your current loan amount is 90% or less of the property value.
  • Step 4 – you must meet all the lending criteria at the time as you will be doing what is known as an internal refinance.
  • Step 5 – you may be required to pay Lenders Mortgage Insurance (LMI) if your loan is above 80% of the property value.
  • Step 6 – once the internal refinance is complete, the guarantor arrangement will cease and the Certificate of Title for the security property will be returned to the guarantor.

Although there are quite a few steps involved, with some lenders the guarantee can be released in a matter of days!

However, each bank differs in their policy so it is best to check with your bank to find out their specific process for removing the guarantee.

Will I have to pay any fees?

There may be some minor administration fees and government fees payable at this time, which rarely total more than $350.

If there are any other applicable fees your lender should disclose these to you.

Speak to us!

Are you interested in applying for a guarantor loan? Or do you want more information on removing the guarantee? We can help! Please enquire online or call us on 1300 399 056.

Our expert team of mortgage brokers can help you get approval and ensure that your guarantor is protected from the risk involved in this loan arrangement. Speak to us today!

How to remove a guarantor

I always advise people to go over their finances thoroughly before they enter into any type of loan agreement so you don’t run into any difficulties in the first place.

That being said, getting out of a loan if you run into financial difficulty isn’t entirely impossible either if you know what you’re doing.

In this post, I’ll be looking at options you have if you want to get out of a guarantor loan both as a guarantor as well as as a borrower.

How Do I Get out of a Guarantor Loan?

Before you can think about how you’re going to get out of your guarantor loan, first you have to look at what your role is in the loan agreement.

Are you the guarantor or the borrower? This is important because the approaches differ depending on what your role is.

As a Borrower

If you’re the borrower in the loan agreement, i.e., you’re the one who has taken out the loan and are now having trouble to repay the debt, then you’re going to have to look at other options to take care of it.

Please note that you must take actions fairly quickly if you are starting to fall behind on your payments towards the loan.

Once you start failing to make payments, the lender will ask your guarantor to make the payments for you. Please note that the lender may also take the payment directly from your guarantor’s bank account using a Continuous Payment Authority which is typically set up when your loan application is initially approved. All lenders that are authorised and regulated by the Financial Conduct Authority and offer guarantor loans have a right to do this.

Please note that defaulting on your loan repayments will be recorded on both your as well as your guarantor’s credit files. Thus, it’s very important that you take measures to take care of your debt if you’re starting to run into financial difficulties and want to opt out of the loan entirely.

The options you have of settling your debt if you can’t afford to pay it when it comes to a guarantor loan are pretty much the same as they are for any other loan.

These would, namely, be debt solutions such as an Individual Voluntary Arrangement (IVA), a Debt Management Plan (DMP), a Debt Relief Order (DRO) or bankruptcy.

An IVA involves a formal, legally-binding agreement between you and your creditors that you’re going to pay them back through affordable monthly instalments over the course of an agreed-upon period of time (usually 5 years). At the end of this duration, any debt that is leftover is written off. Please note that you will only be required to pay what you are able to afford.

Bankruptcy is much quicker than an IVA (typically lasts three years) but the important thing to note when it comes to bankruptcy is that your valuable assets are not safe. Assets such as your car and house could be repossessed and sold off in order to make up for your debt.

A Debt Management Plan is quite similar to an IVA in that you make affordable monthly payments towards your creditors. You can get a DMP set up for yourself by talking to a DMP advisor.

A Debt Relief Order (DRO) can work for you if your guarantor loan has a total amount of less than £20,000 and you have less than £50 of spare income every month. DROs last only a year after which your debt is completely written off.

It’s important to note that debt solutions such as these differ a lot from one another in terms of flexibility, how much of your debt is written off as well as the type of impact they have on your credit history.

For example, when it comes to a DRO, all of your debt is written off whereas in an IVA, only some of your debt is written off and even that isn’t always a guarantee. However, it’s much more difficult to qualify for a DRO than it is for an IVA.

It’s easy to qualify for bankruptcy and it involves the entirety of your debt being written off. However, your assets are not protected when you opt for bankruptcy.

Thus, when you’re considering getting out of a guarantor loan as a borrower, it’s very important to take all of these factors into account. Any debt solution you opt for is going to be mentioned in your credit file.

Your finances, assets as well as the impact these solutions are going to have on your credit score are all aspects that you should take into account when making this decision.

For more information on debt solutions as well as which one would be suitable for you, you can opt to seek advice from an independent debt charity such as StepChange.

As a Guarantor

Getting out of being a guarantor to a loan is quite difficult which is why I urge everyone to think it over thoroughly before they agree to be a guarantor for a loan.

If you want to stop being a guarantor, you’re going to have to approach the lender directly and inform them of this.

Whether the lender agrees to remove you as a guarantor from the loan agreement depends on a number of different factors.

If the loan hasn’t been paid out yet, it can be fairly easy to get yourself removed as a guarantor. All you have to do is contact the lender and they will remove your name without any costs to you or the borrower.

It is also fairly easy to have your name removed as a guarantor during the 14-day cooling-off period. This period occurs after you sign the loan agreement.

You also stand a fair chance of getting your name removed as a guarantor if the borrower takes out another loan from the same lender without your consent.

You can also have yourself removed if you were coerced in any way to become a guarantor or if you did not fully understand your responsibilities. Please note that you may have to provide proof if this is the case.

If your financial circumstances change and you are now incapable of making payments on behalf of the borrower, this can help you remove yourself as a guarantor from the agreement as well.

In any other case, you will most likely have to find a replacement for yourself and if the lender feels that they can be a suitable replacement for you, then they may consider a swap.

If you can’t find a replacement, want to stop being a guarantor and none of the circumstances I’ve described above apply to you, then you’ll either have to make the borrower pay back the debt in full or you’re going to have to pay it back in full.

Conclusion

Being a guarantor for loans is a huge responsibility that many loan guarantors don’t realise when they first agree to become one.

As I’ve described above, getting out of being a guarantor isn’t impossible but it is fairly difficult. Thus, you should think it over thoroughly before you ever become one.

One or more guarantors can be added to a loan account application when it is Pending Approved or Approved. Guarantors may be, but are not required to be, clients.

Adding a guarantor to a loan account application does not affect the loan account application’s status.

On this page:

To add a guarantor who is an existing client to a loan account application

When viewing a loan account, click More on the action bar and select Guarantor .

  1. Check the Existing Client box.
  2. Start typing the client’s name in the name field.
    Candidate client names will appear in a list.
  3. Click to select the client in the list who is the guarantor.
    The client details (Name, ID, Office, Activation Date) will display.
  4. Select Relationship from the list.
  5. Click Submit.

The guarantor will be added to the loan account application.

To add a external guarantor to a loan account application

When viewing a loan account, click More on the action bar and select Guarantor.

  1. Uncheck the Existing Client box.
  2. Select Relationship from the list.
  3. Type the guarantor’s First name (required).
  4. Type the guarantor’s Last name (required).

Select the guarantor’s date of birth (DOB) from the calendar pop-up.
The date format is dd mmmm yyyy.

Type the guarantor’s Address using one or two lines as necessary.

Type the guarantor’s City.

Type the guarantor’s Zip code.

Type the guarantor’s Mobile phone number.

Type the guarantor’s Residence phone number.

  • Click Submit.
  • The guarantor will be added to the loan account application.

    To remove a guarantor from a loan account.

    When viewing a loan account that has one or more guarantors, click the Guarantor Details tab.

    1. Click the trashcan next to the guarantor to delete.
    2. Click Confirm.

    The guarantor will be removed from the loan account application.

    To update guarantor details (external guarantor).

    When viewing a loan account that has one or more guarantors, click the Guarantor Details tab.

    1. Click the notepad (blue) next to the guarantor to update.
    2. Make any desired changes.
    3. Click Submit.

    May 21, 2019

    Knowledge Hub / Can you stop being a guarantor?

    Can I stop being a guarantor?

    Can I stop being a guarantor?

    If you have signed up as someone’s guarantor for a guarantor loan, it is not possible to stop being one if you have already signed the contract, and the loan has been granted.

    Whilst the reasons why you may decide to no longer be a guarantor can be credible (for example, the average span of a guarantor loan can end up lasting 60 months in total) and over this course of time, you may change your mind about being one’s guarantor. However, despite this, it is important to remember that you cannot stop being a guarantor once approved.

    As a result, this is why you should very carefully consider the pros and cons of being a guarantor before signing an agreement to be one, and be sure that you are fully aware of the consequences and requirements of being one, too.

    Why can’t I stop being a guarantor?

    The fundamental reason as to why you can’t suddenly no longer be someone’s guarantor, is that you were a main deciding factor in the approval process of the loan itself to start with.

    This is because when the lender is assessing whether or not to approve or decline the loan application, they will be primarily assessing your history as the guarantor, rather than the main borrower (who usually does not have as good as credit history, hence the need for a guarantor for their loan).

    Consequently, the money lender looks thorough at your affordability, credit history, employment status, homeowner status, location and age when deciding if the loan is approved, as well as for how long and how much is borrowed over all.

    All of this means that if the guarantor was suddenly removed, and a new one was brought in instead, this could change the terms and conditions that the original loan was approved on the basis on, which could mean potentially a higher risk for the lender. Furthermore, the loan may have never been funded to start with, if a new guarantor with different credentials is given.

    What if the guarantor dies?

    Whilst unlikely, it is possible that if the chosen guarantor dies, a spouse of the decease can replace them. This will be dependent on the individual lender.

    It is also possible that the lender could have a claim on the property or estate of the guarantor in order to recover debt.

    Are there any ways to stop being a guarantor?

    Whilst it is not possible to suddenly stop being a guarantor, there are ways in which you can get out of it. The following circumstances can allow you out of a guarantor loan agreement, such as:

    • If the borrower or guarantor pays the loan back early: this terminates the agreement. The majority of guarantor lenders will enable you to make early repayments, even if it is supposed to last five years. Nevertheless, it is important to keep in mind that you may need to pay additional costs for closing the loan earlier than anticipated.
    • If the lender goes bust: the only other possible way you can get out of being someone’s guarantor, is if the loan provider happens to go bust. This is unlikely to happen, and shouldn’t be relied upon as an option, evidently!

    Do I have time to change my mind on being a guarantor?

    Yes. When you initially agree to become a guarantor for someone, you are given a grace period of two weeks, typically, by most reputable lenders. This two week period starts from when the loan itself was funded.

    Usually, the money granted is sent to the guarantor’s bank account first. After this, the funds can be sent directly to the borrower or back to the loan provider.

    If the guarantor changes their mind during this 2-week period, there is no extra charges to giving the money back.

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    Find out who can be a guarantor, what to do if you can’t find one and what to check in your guarantor agreement.

    When you might need a guarantor

    Some landlords and agents ask for a guarantor before they’ll offer you a tenancy.

    A guarantor agrees to pay your rent if you don’t pay it. They’ll have to sign a guarantor agreement which confirms their responsibilities and when they have to pay.

    You might be asked for one if you:

    have poor or no credit history in the UK

    are a student or renting for the first time

    are unemployed or have a low income

    move to the UK from overseas

    Your landlord or agent can’t charge extra fees if you need a guarantor. For example, they can’t charge for a credit check or a guarantor agreement.

    Who can be a guarantor

    Guarantors are usually a relative or close friend of the tenant, but they don’t have to be.

    Guarantors usually need a good credit history and income or savings above a certain amount. Check your landlord’s requirements.

    A landlord might reject a guarantor or ask for more information if, for example, they:

    don’t own a property

    Your landlord might carry out a credit check on your guarantor or ask for proof of their income, savings or other financial details.

    Options if you can’t get a guarantor

    You may not need a guarantor if you can pass a credit check or show proof of income.

    If you have a poor credit history or low income, a landlord may still rent to you if you can pay some rent in advance.

    Some councils and charities have rent deposit, bond and guarantee schemes that:

    give cash to help with rent in advance and a deposit

    act as a guarantor service and cover unpaid rent or damage up to a certain amount

    You may have to pay back any money paid on your behalf.

    Money you don’t have to pay back

    You might be able to get a discretionary housing payment (DHP) if you claim housing benefit or universal credit where you live now.

    Some charities offer grants to people in need. Use the Turn2Us grants search to find out if you can get help.

    Students

    Ask your university or college about any funds or support available. They might have:

    a hardship fund

    student support services

    details of landlords who don’t require a guarantor

    The guarantor agreement

    The guarantor agreement is a legal document. It should be read carefully before signing.

    Make sure you understand:

    when the landlord can ask a guarantor to pay them money

    how long the guarantor agreement lasts

    what happens in a joint tenancy

    Make sure you and your guarantor are happy with what you’re asked to agree to.

    3 things you need to know before agreeing to be a guarantor

    Dan explains what you need to know before signing a guarantor agreement. [Video length: 01:03]

    When your guarantor can be asked to pay

    Check your guarantor agreement. Most landlords can ask the guarantor to pay if the tenant:

    fails to pay rent

    causes damage to the property

    The landlord could apply for a county court judgment (CCJ) against both you and the guarantor if neither of you pay what’s been agreed.

    How long a guarantor agreement lasts

    There’s no general rule about how long a guarantor agreement lasts. It depends on what’s agreed between the landlord and the guarantor.

    Your guarantor should speak to the landlord if they don’t want their liability to continue beyond the end of a fixed term tenancy.

    If the landlord agrees, this should be clearly set out in the guarantor agreement.

    A court can decide if the guarantor agreement is still in place if it’s unclear.

    Changes to the tenancy

    A rent increase or new tenancy usually means that the guarantor agreement no longer applies unless either:

    the guarantor agreement states that it will continue in these situations

    your guarantor agrees to the change

    Guarantors for a joint tenancy

    Joint tenants are ‘jointly and severally liable’ for rent. This means each joint tenant can be held liable for the total amount of rent, not just their share.

    A guarantor agreement for a joint tenancy works in the same way. A guarantor will be liable for every tenant’s rent unless something in the agreement says otherwise.

    If there’s more than one guarantor, each one should sign the guarantor agreement and agree to any changes.

    Example

    In a shared student house the landlord might ask parents to guarantee the rent.

    Each parent could be held liable for the whole rent unless they negotiate an agreement which states they only have to cover their child’s share.

    When a guarantor agreement may be invalid

    Guarantors should be given copies of both the tenancy agreement and the guarantor agreement before they agree to anything.

    All liabilities and the risks involved should be explained to them before they agree to act as your guarantor.

    A debt adviser can check if the guarantor agreement is likely to be enforceable. The agreement may be invalid if your guarantor was forced, pressured or misled into signing.

    Someone I know has been very stupid by signing up as a guarantor on a loan. This was over a couple of years ago.

    Has anyone had any experience of removing themselves as a guarantor after a certain amount of time if payments have been made in a timely manner?
    There must be exceptions when people have split up etc.
    Any advice appreciated.

    Comments

    I didn’t sign the paperwork, I can never understand why people bother trying to be funny in the advice forum.

    If you don’t have anything constructive don’t bother posting. 😡

    I didn’t sign the paperwork, I can never understand why people bother trying to be funny in the advice forum.

    If you don’t have anything constructive don’t bother posting. 😡

    the guarantor surely must have co-signed the loan agreement. it will be written in the paperwork.

    the only advice that can be given is to read the paperwork. any escape clauses (should they exist) will be documented.

    I didn’t sign the paperwork, I can never understand why people bother trying to be funny in the advice forum.

    If you don’t have anything constructive don’t bother posting. 😡

    Is he being funny? Surely you have to sign the paperwork to agree to be guarantor?

    If you never signed anything how do you know you are the guarantor at all?

    Is he being funny? Surely you have to sign the paperwork to agree to be guarantor?

    If you never signed anything how do you know you are the guarantor at all?

    Ah sorry mis-read it. But still the answer is the same, look at the paperwork..

    Someone I know has been very stupid by signing up as a guarantor on a loan. This was over a couple of years ago.

    Has anyone had any experience of removing themselves as a guarantor after a certain amount of time if payments have been made in a timely manner?
    There must be exceptions when people have split up etc.
    Any advice appreciated.

    As people have already said, the detail of that will be in the paperwork, so you’d have to get this person to look at the guarantor agreement.

    I doubt there’ll be any clauses in it that say they can get out of it after a certain amount of payments have been met without default. The whole point of guarantor is that the creditor would not lend to the person directly because they see them as a bad risk, therefore the guarantor is the assurance that the debt will be repaid if they default – and the guarantor agreement will be for the duration of the loan.

    I expect the only way out will be is if the person being guaranteed now meets the creditor’s criteria for lending to them directly without need for a guarantor, which will be at the discretion of the creditor.

    One or more guarantors can be added to a loan account application when it is Pending Approved or Approved. Guarantors may be but are not required to be clients.

    Adding a guarantor to a loan account application does not affect the loan account application’s status.

    When viewing a loan account, click More on the action bar and select Guarantor .

    Check the Existing Client box.

    Start typing the client’s name in the name field. Candidate client names will appear in a list.

    Click to select the client in the list who is the guarantor. The client details (Name, ID, Office, Activation Date) will display.

    Select Relationship from the list.

    The guarantor will be added to the loan account application.

    When viewing a loan account, click More on the action bar and select Guarantor .

    Uncheck the Existing Client box.

    Select Relationship from the list.

    Type the guarantor’s First name (required).

    Type the guarantor’s Last name (required).

    Select the guarantor’s date of birth ( DOB ) from the calendar pop-up. The date format is dd mm yyyy.

    Type the guarantor’s Address using one or two lines as necessary.

    Type the guarantor’s City .

    Type the guarantor’s Zip code.

    Type the guarantor’s Mobile phone number.

    Type the guarantor’s Residence phone number.

    The guarantor will be added to the loan account application.

    When viewing a loan account that has one or more guarantors, click the Guarantor Details tab.

    Click the trashcan next to the guarantor to delete.

    The guarantor will be removed from the loan account application.

    When viewing a loan account that has one or more guarantors, click the Guarantor Details tab.

    Click the notepad (blue) next to the guarantor to update.