# Consequences for loan guarantor?



## Inigo (6 Aug 2013)

I may need to take out a loan from BOI to return to college, and I may need a family member to act as a guarantor.

2 of my sisters are willing to do this but asked me what does that mean for them, in particular if they look for a loan themselves in the future? 

Now, I have had multiple loans in my life but I can't recall ever being asked if I was a guarantor on a loan myself. So, will my sisters be asked that in the future? Will it impact on their credit? One sister already has a mortgage, the other may look for one next year or may take out a modest personal loan herself in the future. Both have decent, permanent jobs and no other debts I think.

Are loan guarantees recorded somewhere like with the ICB?


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## Gerry Canning (6 Aug 2013)

If they guarantee you ,they become liable should you not pay.
If your sisters look for a loan in the future ,the Guarantee will be  a liability against them. If loan is running ok , that should not be an issue.Banks should always ask a loan applicant what loans or guarantees they have given.
Loan guarantees for individuals are not  normally logged on the ICB.

Comment; Probably Banks are being cautious, it gives them (family pressure) cover should you not pay  , but if your sister signs , she becomes liable.


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## Inigo (6 Aug 2013)

Thanks Gerry. Of course I realise they would have to pay if I don't. I'm assuming for this discussion that that won't arise.

I've never seen a bank ask if someone is a guarantor, how would it even come up later on for my sisters? Is it recorded somewhere? Have you ever seen a bank ask if someone is a guarantor already? I haven't. I just filled in a loan form last week and nowhere was I asked if I myself had any guarantees given. I was only asked about loans, savings, income and so on.

I'm obviously assuming the guarantee will never be called in, that's a different matter. If the loan is not called in, is it actually a liability for them?


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## Palerider (6 Aug 2013)

The liability on a guarantor is a contingent liability in so far as it does not arise unless the primary debtor defaults and the bank call in the debt by formally calling upon the guarantor for full repayment.

It is not recorded anywhere outside of the Bank it is provided too and I cannot see it arising as an issue for those individuals who have provided small guarantees.

It should come up if the amount being guaranteed is significant, a bank will want to know if there are any contingent liabilities hanging out there before accepting a person as a guarantor for a meaty sum.


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## Inigo (8 Aug 2013)

Palerider said:


> The liability on a guarantor is a contingent liability in so far as it does not arise unless the primary debtor defaults and the bank call in the debt by formally calling upon the guarantor for full repayment.
> 
> It is not recorded anywhere outside of the Bank it is provided too and I cannot see it arising as an issue for those individuals who have provided small guarantees.
> 
> It should come up if the amount being guaranteed is significant, a bank will want to know if there are any contingent liabilities hanging out there before accepting a person as a guarantor for a meaty sum.



What would you call significant?

Also, I have 2 sisters:



Sister A is 35 and married to a husband with a good, secure job but has a mortgage (not large as it's new) and is on maternity leave from a permanent job.
Sister B is single and 30. She is a physio on contract with the HSE but has been given a permanent job with the HSE but is just waiting for that contract any day. She has no mortgage.
Option C is my self-employed father who is 68 but does not intend to retire.
As I'm older, I hate the idea of asking them but I may have no choice.


Neither of them have guaranteed any other loans and have no other debt.

Which one would be the better guarantor in the eyes of the bank, do you think? The Bank says they would accept 2 guarantors to spread the load.


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## Palerider (8 Aug 2013)

Well I would not consider a loan for college to be significant, One Guarantor is enough, one with a permanent job and a good credit rating. 

I assume you will be working part time to assist repayment etc.


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## Inigo (9 Aug 2013)

Palerider said:


> Well I would not consider a loan for college to be significant, One Guarantor is enough, one with a permanent job and a good credit rating.
> 
> I assume you will be working part time to assist repayment etc.



I was just thinking of 2 guarantors to spread the ask on my relatives.

This isn't your standard college loan. It would amount to 60K over 4 years, with repayments deferred until graduation. I'll certainly work if I can get it but I can't bank on that, and I don't expect to make much repayments until graduating, most likely. Luckily, work is essentially guaranteed on graduating.


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## Mrs Vimes (9 Aug 2013)

Inigo said:


> I was just thinking of 2 guarantors to spread the ask on my relatives.



You would need to ensure that the bank do not set *both* guarantors up as guaranteeing *all* of the loan - if they will agree to cover half each it would spread the ask.


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## drrkpd (9 Aug 2013)

*Be very careful*



Inigo said:


> I was just thinking of 2 guarantors to spread the ask on my relatives.
> 
> This isn't your standard college loan. It would amount to 60K over 4 years, with repayments deferred until graduation. I'll certainly work if I can get it but I can't bank on that, and I don't expect to make much repayments until graduating, most likely. Luckily, work is essentially guaranteed on graduating.



I may be wrong but the statements this is a 4 year course and work is essentially guaranteed on graduating makes me conclude this is a graduate medical degree.
You must be realistic as to what a doctor really earns esp after tax and levies and with overtime severely reduced.
It would be worth reading this

http://www.askaboutmoney.com/showthread.php?t=180602

Which is a qualified doctor in debt from student loans and considering UK bankruptcy.
You have to be aware that you will start working with a huge loan and probably interest around 10%.This is not easy to do on current take home medical salaries. So be very careful who your guarantor is.
.


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## Inigo (12 Aug 2013)

Mrs Vimes said:


> You would need to ensure that the bank do not set *both* guarantors up as guaranteeing *all* of the loan - if they will agree to cover half each it would spread the ask.




Yes, that's what I would intend, thanks for confirming.


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## Inigo (12 Aug 2013)

drrkpd said:


> I may be wrong but the statements this is a 4 year course and work is essentially guaranteed on graduating makes me conclude this is a graduate medical degree.
> You must be realistic as to what a doctor really earns esp after tax and levies and with overtime severely reduced.
> It would be worth reading this
> 
> ...



Yes, you've guessed it. I'm all too aware and scared of the debt, the salary cuts and the pressure, unfortunately. Hence my strong reluctance to put anyone else on the hook for this, but I may have no choice.

The doctor in the the thread you link to is in a different situation to me. For the first few years of the grad medicine course, the loans were for 100K as they covered fees and living. However, since last year the loans only cover fees to a total of just under 60k. That doctor also had old loans so he apparently owes a total of 130K plus interest. My debt would be 60K plus interest - not small at all, but a different story from his.

The interest rate is 4% while studying (deferred payments) and 7.4% after that so it's relatively cheap.

EDIT: On a related note, if I borrowed to set up a business I could write off the interest, so it seems a little perverse to me that there's no way to do this for this loan. And the tax credit on fees paid against PAYE is of very little use, there should be some way to spread it over the first few years of working. But, it's not going to happen, it's just very frustrating.


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## drrkpd (13 Aug 2013)

Well all good luck in your chosen profession- it is a passport to do many things and go different places if you want to.
Just checked and the UK student loan company interest rate is fixed at 1.5% until further notice- does make you think!,


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## Inigo (15 Aug 2013)

drrkpd said:


> Well all good luck in your chosen profession- it is a passport to do many things and go different places if you want to.
> Just checked and the UK student loan company interest rate is fixed at 1.5% until further notice- does make you think!,



Thanks. The good news is I am not now being required to have a guarantor as my circumstances are good, so my family is off the hook.

Yes, spot on about the UK loans. The bank here will make 33K interest off my 60K loan, nice work if you can get it. But, it shows how much could be made by a state-backed venture here if they could undercut that. Win-win for everyone.


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