What is a guarantor loan?
Pros and cons
Who can go guarantor?
- Over 18 years of age.
- A citizen or permanent resident of Australia.
- Able to prove their income and employment.
- Able to show sufficient savings and have an asset they can put up as security against the loan.
Secured guarantor loans
Unsecured guarantor loans
For guarantors: Things to consider
- If the borrower cannot make repayments, you will be responsible for paying back the loan, including interest and fees. If you are unable to pay it back, the lender may take the asset you nominated as security, such as your car or home, to cover the cost of the loan.
- If things don’t work out, it could damage your relationship.
- Going guarantor on a loan will appear on your credit record, even if the borrower repays the loan on time. This could affect your ability to secure loans and credit in the future.
- If the borrower misses a payment, it could be listed as a default on your credit report. A low credit score makes it hard for you to take out a loan in the future.
- Could going guarantor impact your own long-term financial goals, such as retirement?
- Are you better off gifting the money or loaning the funds directly to your loved one?
- Take the time to understand the loan conditions, including the amount, interest rate, fees and loan term.
- Consider the security of your loved one’s current income and employment. Are they at risk of defaulting?
- Calculate how much you’d have to pay if the borrower defaulted and how this might impact your own financial health.