Becoming a guarantor is all about trust. The three main things to consider before entering an agreement are:
Arrears are unusual as affordability checks are always carried out with both borrowers and guarantors before the loan can be approved. We understand that people may have run into financial difficulties in the past, so applications are not judged solely on credit scores. That said, guarantor loans won't be approved if the applicant has been an undischarged bankrupt in the last 12 months, has been in an Individual Voluntary Agreement (IVA) in the last 12 months or is currently in a Debt Management Plan (DMP).
As a guarantor, you will need to be prepared for the unlikely worst-case scenario - that is having to pay off the entirety of the loan on behalf of the borrower. The lender will always try to bring loan accounts out of arrears by speaking to the borrower first, but if they can't, they will get in touch with you.
Your home is never at risk, but if repayments cannot be collected from either the borrower or the guarantor, the loan will default. This will be reported to the Credit Reference Agencies against the borrower and will have a serious impact on their credit rating. Further legal action may then need to be taken against the borrower, guarantor, or both.
Rest assured, the lender will always try to find the best solution possible and we encourage all of our customers to be as open as possible if they do face any unfortunate difficulties.