What Happens To Guarantor Loans If You Go Into Debt Management?
A Debt Management Plan, if you are not aware is a form of debt solution that doesn’t involve any extra borrowing or funding. It’s essentially a scheme which allows people who have a reasonable amount of debt but can’t afford the repayments to clear it all off at an affordable monthly payment.
To sign up to a debt mangement plan, you need to find an an authorised debt solutions company – They will then guide you through the process and attempt to arrange for all your debts to be frozen and get a payment plan put into place with each creditor. Once this is done, you simply pay your debt management company a monthly amount (which you agree to and work out beforehand), they will then distribute this amount between your creditors as agreed. The debts will then be paid off in the timescale agreed with your DM company before you signed up to the arrangement.
So, what about if one of your debts is a guarantor loan? Well, this may work slightly differently. Any other debts you have can normally be put into debt management as normal, but because guarantor loans require a guarantor to sign the credit agreement, they may then become responsible for repaying the loan on your behalf rather than entering into the DM plan. This is simply because the guarantor loan lender may wish to claim as much credit back as they can, therefore if the guarantor is able to pay then they may be persued for the money. This will likely be in the terms of the credit agreement, so if the applicant can’t meet repayments, the guarantor takes over.
If you are thinking of entering a debt management plan and have guarantor loans, then it is probably worth speaking to the lender so see what arrangements can be put into place beforehand. They may have different procedures and policies in place to help you in tricky situations like this. Also make sure you speak to your guarantor before going ahead, after all they should be in the know as well as you.
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