Be Wary of Guaranteeing a Loan

Home
>
Loan
>
Be Wary of Guaranteeing a Loan

Be Wary of Guaranteeing a Loan

You need to be wary of guaranteeing a loan. What would you do if a friend or relative asked you to guarantee a loan? You would probably like to help them by agreeing to guarantee the loan but consider your actions carefully first and make sure you understand what it involves.

You are being asked to guarantee a loan. Think carefully before you do. If the borrower does not pay the debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.

You may have to pay up to the full amount of the debt if the borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.

The creditor can use the same collection methods against you that can be used against the borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.

Studies of certain types of lenders show that for guaranteed loans that go into default, as many as three out of four guarantors are asked to repay the loan.

If you guarantee a loan and your friend or relative misses a payment, the lender can immediately collect from you without first pursuing the borrower. In addition, the amount you owe may be increased - late charges - if the lender decides to sue to collect. If the lender wins the case, your wages and property may be taken.

Despite the risks, there may be times when you want to guarantee a loan. Your child may need a first loan, or a close friend may need help. Before you guarantee a loan, consider this information:

Be sure you can afford to pay the loan. If you're asked to pay and can't, you could be sued or your credit rating could be damaged.

Even if you're not asked to repay the debt, your liability for the loan may keep you from getting other credit because creditors will consider the guaranteed loan as one of your obligations.

Before you pledge property to secure the loan, such as your car or furniture, make sure you understand the consequences. If the borrower defaults, you could lose these items.

Ask the lender to agree, in writing, to notify you if the borrower misses a payment. That will give you time to deal with the problem or make back payments without having to repay the entire amount immediately.

Make sure you get copies of all important papers, such as the loan contract. The lender is not required to give you these papers; you may have to get copies from the borrower.

You may freely reprint this article provided the author's biography remains intact:

John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

In The News:

Suzlon Rebounds as Loans Promise to Avert Default
BusinessWeek
By Natalie Obiko Pearson on May 25, 2012 Suzlon Energy Ltd.'s (SUEL) convertible bonds are rebounding from a four-month low after India's biggest wind-turbine maker obtained loan pledges to avoid default in the coming three weeks.

and more »

Christian Science Monitor
Student loan proposals from both parties denied
TheReporter.com
By AP WASHINGTON (AP) -- The Senate rejected dueling Democratic and Republican plans on Thursday for averting a July 1 doubling of interest rates on federal college loans for 7.4 million students, pushing back efforts to resolve the election-season ...
Psst, students. Still hope for low-rate student loans, despite Senate balkingChristian Science Monitor
Senate kills both sides' student loan plansThe Tennessean

all 522 news articles »

China Banks May Fall Short of Loan Target as Demand Slumps
San Francisco Chronicle
May 25 (Bloomberg) -- China's biggest banks may fall short of loan targets for the first time in at least seven years as an economic slowdown crimps demand for credit, three bank officials with knowledge of the matter said.

and more »

Inpex, Total seek $20 bln loans for Australia LNG -sources
Reuters
Export credit agencies to drive funding * Deal shows investor appetite intact for well advanced, high quality projects * Japanese banks to drive pricing of loan By Sharon Klyne and Wakako Sato SYDNEY/TOKYO, May 25 (Reuters Basis Point) - Inpex Corp and ...

and more »

ECB loans, rate cut view pull down Euribor rates
Reuters
FRANKFURT, May 25 (Reuters) - Key euro zone bank-to-bank lending rates fell to new two-year lows on Friday, dragged down by the ECB's recent deluge of ultra-cheap bank loans and a growing expectation it will have to cut euro zone interest rates again ...

and more »

Home loan: prepayment helps
Hindustan Times
A home loan is usually the biggest debt that a person takes on during a lifetime. Given a long tenor and high amount of loan, the total interest you pay to the lender is almost as big, if not bigger, as the loan amount itself.

and more »

Oregon Bankers Association Celebrates Small Business Week with Tips on ...
MarketWatch (press release)
SALEM, Ore., May 25, 2012 /PRNewswire via COMTEX/ -- In honor of National Small Business Week (May 20-26), the Oregon Bankers Association (OBA) has issued tips to help small business acquire a loan from Oregon banks. The OBA has also developed a small ...
Deadline to Apply for SBA Economic Injury Disaster Loans in Rhode Island is ...U.S. Politics Today
Deadline for New York Private Non-Profit Organizations to Apply for SBA ...DigitalJournal.com (press release)

all 15 news articles »

Payday Loan Companies on Loans.net Find New Customers in Recent College ...
MarketWatch (press release)
NEW YORK, May 25, 2012 (GlobeNewswire via COMTEX) -- via PRWEB - For years, payday loans were used by a specific group of low-income wage earners in the US, but that has now changed according to a new study by ThinkFinance, which offers banking ...

and more »

Failing students on loans
msnbc.com
Gerry Connolly, D-Va., joins Chris Cillizza to discuss the student loan debate taking place on Capitol Hill. >>> congress rejected calls from president obama and mitt romney to keep student loan rates down and both pears are paving the way for rates to ...

MLive.com
Federal lawsuits for student loan recovery far less common in West Michigan ...
MLive.com
comThe number of lawsuits filed for student loan recovery is far larger on the east side of the state of Michigan than in West Michigan. GRAND RAPIDS, MI -- If you've defaulted on your student loans, you're far less likely to wind up in front of a ...

and more »

Google News