Going guarantor

[Jamie]

Hi all,

Was just wondering about the process of guaranteeing loans for others. A number of people on the forum have mentioned the practice as a good way for securing funds when "going it alone" isnt enough. Ive noticed a few on the forum have proposed their parents guaranteeing loans for them, while a few of the parents on the forum have done this for their own children (and there should be more like you!).

My question is: How does this affect the serviceability of the guarantor? Ive heard in some instances and with some lenders, being a guarantor effectively means that you are responsible for the entire debt in terms of serviceability. If a person was to go guarantor on a loan for someone else, would this affect the guarantors chances of securing finance for themselves 3 or 6 months down the track? How do banks assess loans when a guarantor is present? Is it simply a matter of adding the assets/serviceability of the borrower and the guarantor, or is it more complicated than that? Does the guarantor need to prove that, in a worst-case-scenario, they have the means to service the debt on their own?
And is there a limit to the number of loans you can provide a guarantee for before a bank says enough?

Thanx,

Jamie

 

[asy]

Hi Jamie!

I'm sure you will get a great response to your question, but in the meantime, try to do a search on guarantor.

There have been a few really good threads discussing the effect on your serviceability by going guarantor.

See if you can augment the answers you will get here, with what's in the archive.

hope this helps

asy

 

[Rolf Latham]

Hi Jamie


Guarantor methods are a last resort - blech .

In many cases I refuse to take on the business and refer it on to others.

The best way to describe a "serviceability" guarantee is one of jointly and severally liable for the debt.

This means that the guarantors financial position can be diminished by the guarantee.

There are promoters that say a guarantee is a just a contingent liability and may never be called.

There are commonly better and less risky ways for M&D for example to help, like getting their own loan for the kids etc .

ta

Rolf