Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Warning over risks of guarantor loans: friends and family unknowingly signing up for financial problems

Citizens Advice warns that so-called 'friends' deals can be as dangerous as payday loans

Simon Read
Friday 17 July 2015 16:39 BST
Comments
Out of Rach: Jennifer Aniston in 'Friends'
Out of Rach: Jennifer Aniston in 'Friends'

Friends and relatives of people struggling with debts are being saddled with huge debts themselves after unknowingly signing up to guarantee expensive loan repayments.

Citizens Advice’s new report on guarantor loans, published today, warned that the deals can be as harmful as payday loans.

With these arrangements, involving loans that range from £1,000 to £7,500 and have an average interest rate of 46.3 per cent, borrowers give the name of a friend or family member to act as a guarantor for them. But almost half of those named as such, and who subsequently contacted the charity, had no idea of the extent of their responsibilities or that they would be pursued for the cash if the borrower defaulted or got behind with payments. The report also warned that guarantors are often liable for the debt if a borrower dies.

“Guarantor loans carry huge risks,” warned Gillian Guy of Citizens Advice. “Our evidence shows people are getting involved without being aware of the dangers.” The charity wants lenders to be forced to provide guarantors and borrowers with a letter of agreement and include a cooling- of period. There should also be a liability warning on promotional material.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in