Missing a payment on a guarantor loan is a serious matter. It affects not just your own finances and credit record, but potentially those of the person who agreed to back your borrowing. This article explains what typically happens, step by step, and where to get free help before things go further.
This article is for information only. It does not constitute financial or legal advice. If you are in financial difficulty, a free debt adviser can help you work out the best course of action for your situation.
What happens when you miss a payment?
The sequence of events depends on how quickly you act and how your lender handles arrears. In most cases, the lender contacts you first, then pursues your guarantor if you do not pay. If neither of you pays and the debt remains unresolved, the lender may take legal action. The speed at which each stage happens varies by lender, but the broad pattern is the same.
Acting as soon as you think you might miss a payment gives you more options. Waiting until you are already in arrears reduces them.
What does the lender do after a missed payment?
When a payment is missed, the lender will typically:
- Contact you by letter, email, or phone to inform you the payment has not been received.
- Give you an opportunity to pay the overdue amount or agree a revised plan.
- Send a formal notice if the missed payment is not resolved quickly.
Lenders authorised by the Financial Conduct Authority (FCA) are required to treat customers in financial difficulty fairly. That includes considering requests for a payment arrangement before escalating the account.
If you contact the lender promptly, it is often possible to agree a short-term arrangement. This does not remove the missed payment from the record, but it may prevent a formal default being registered.
Be careful if you ignore contact from the lender. Doing so generally speeds up the escalation process.
When does the lender contact the guarantor?
The loan agreement sets out when the lender can turn to your guarantor. In most guarantor loan agreements, the lender is entitled to pursue the guarantor as soon as a payment has been missed. Some lenders wait a few weeks; others act more quickly.
Your guarantor will usually receive a letter or call from the lender asking them to make the missed payment on your behalf.
If you are struggling to pay, it is worth talking to your guarantor before the lender contacts them. Finding out from the lender before hearing from you can damage the relationship, and your guarantor may not know what their obligations are.
Your guarantor is not just a reference. They agreed to pay the debt if you cannot. That liability is real and can be enforced.
What is a default notice and what does it mean?
If the account remains in arrears after contact from the lender, you may receive a default notice. Under the Consumer Credit Act 1974, a lender must give you at least 14 days to remedy the arrears before they can formally close the account or take further action.
If the arrears are not cleared within that period, the lender can register a default on the account. A default is a formal record that the agreement was seriously breached.
A default can affect both your credit file and, in some cases, your guarantor's credit file. It can remain on a credit file for six years from the date it was registered. This can affect the ability of both borrower and guarantor to obtain credit, mortgages, or other financial products during that period.
What can go wrong
The guarantor is pursued for the full outstanding balance. If you do not pay and the lender turns to your guarantor, your guarantor may be asked to pay not just the missed payment but the entire remaining balance. Check your loan agreement for the exact terms.
Both credit files can be affected. A default or county court judgment (CCJ) registered because of this loan may appear on both your credit file and your guarantor's. Your guarantor may not have expected this when they agreed to support your application.
Court action is possible. If neither you nor your guarantor pays the debt, the lender may apply for a county court judgment (CCJ). A CCJ is a court order requiring payment and remains on the Register of Judgments, Orders and Fines for six years unless it is paid in full within one month of the judgment date.
A charging order can put property at risk. After a CCJ, the lender can apply for a charging order against a property owned by the borrower or, in some cases, the guarantor. A charging order does not force an immediate sale, but it means the debt must be paid when the property is sold or remortgaged. If the lender applies for an order for sale on top of a charging order, there is a risk that the property could be sold to recover the debt. This is more common with larger outstanding balances.
The relationship between borrower and guarantor can break down. Beyond the financial consequences, the strain of this situation can damage personal relationships. If your guarantor ends up paying a debt on your behalf, they have a legal right to recover that money from you. That process can be difficult and costly.
What to check before the situation gets worse
If you have already missed a payment or expect to miss one soon, a useful first step is to:
- Contact your lender directly. Explain your situation and ask what options are available. Lenders regulated by the FCA are expected to consider reasonable requests from customers in financial difficulty.
- Speak to your guarantor. They need to know what is happening. They may also benefit from taking independent debt advice.
- Review your budget. A free budget planner can help you identify what you can realistically afford to repay and what other debts may need to be prioritised.
- Understand which debts are priorities. Rent, council tax, gas and electricity, and court fines are generally considered priority debts because the consequences of not paying them are more immediate. A guarantor loan is an unsecured debt, but the consequences of default still include credit file damage and potential court action.
- Get free debt advice before taking on more credit. Taking out another loan to cover this one may increase the total amount you owe and does not address the underlying problem.
Free debt help
If you are struggling to pay or are already in arrears, free debt advice is available from:
- StepChange Debt Charity: 0800 138 1111 (free from landlines and most mobiles). Online help also available at stepchange.org.
- National Debtline: 0808 808 4000. Free advice by phone and online.
- MoneyHelper: 0800 138 7777. Government-backed money guidance service, covering debt options in detail.
These services are free, impartial, and available to anyone in the UK. They do not require you to have already missed payments. If you are worried about keeping up with repayments, contacting them early is always an option.
Frequently asked questions
Can the lender go straight to my guarantor without contacting me first? Most lenders will contact the borrower first and try to agree a repayment arrangement. However, the loan agreement typically allows the lender to pursue the guarantor as soon as a payment is missed. The FCA expects lenders to treat customers fairly, but the guarantor's liability is usually triggered from the point of default.
Will a missed payment affect my guarantor's credit file? It can. If a default is registered on the account, it may appear on both your credit file and your guarantor's. A default can remain on a credit file for six years. Your guarantor may not have realised this was possible.
What happens if my guarantor cannot pay either? If neither party can pay, the lender may pursue both through the courts. A CCJ could be made against either or both. If a charging order follows, property owned by the guarantor could be at risk. Free debt advice is important for both parties in this situation.
Can I negotiate a repayment arrangement with the lender? Yes. Contacting the lender before a default is registered and proposing a revised payment plan is often possible. Lenders regulated by the FCA are expected to consider reasonable requests from customers in financial difficulty. Acting early gives you more options.
Does my guarantor have any rights if they are asked to pay? A guarantor who pays the debt may have the right to recover that money from the original borrower (known as a right of subrogation). Both parties may benefit from independent legal or debt advice.
Where can I get free help? StepChange (0800 138 1111), National Debtline (0808 808 4000), and MoneyHelper (0800 138 7777) all offer free, impartial debt advice with no obligation to take on further credit.
Related reading
For a broader understanding of how guarantor loans work, including what a guarantor agrees to and how lenders assess applications, see our guide to guarantor loans.
If you are managing multiple debts and wondering whether consolidating them might help, the debt consolidation guide sets out how consolidation works and what to consider before applying.
If you are worried about keeping up with repayments more generally, the worried about repayments route covers your options in one place.
Sources
- Financial Conduct Authority (FCA): Consumer Credit sourcebook (CONC), rules on arrears, default, and forbearance.
- MoneyHelper: guidance on guarantor loans and debt options.
- StepChange Debt Charity: guidance on dealing with missed payments and default.
- National Debtline: factsheets on county court judgments and charging orders.
- Can the lender go straight to my guarantor without contacting me first?
Most lenders will contact the borrower first and try to agree a repayment arrangement. However, the loan agreement typically allows the lender to pursue the guarantor as soon as a payment is missed. Check your agreement for the exact terms. The FCA expects lenders to treat customers fairly, but the guarantor's liability is usually triggered from the point of default.
- Will a missed payment affect my guarantor's credit file?
It can. If the lender records a default on the account, that default may appear on both your credit file and your guarantor's. A default can remain on a credit file for six years. Your guarantor may not realise this is possible, which is why early communication matters.
- What happens if my guarantor cannot pay either?
If neither you nor your guarantor can pay, the lender may pursue both through the courts. A county court judgment could be made against either or both of you. If the lender then applies for a charging order, any property owned by the guarantor could be at risk. Free debt advice is important for both parties in this situation.
- Can I negotiate a repayment arrangement with the lender?
Yes, it is often possible to contact the lender before a default is registered and propose a revised payment plan. Lenders regulated by the FCA are expected to consider reasonable requests and treat customers in financial difficulty fairly. Acting early gives you more options.
- Does my guarantor have any rights if they are asked to pay?
A guarantor who pays the debt may have the right to recover that money from the original borrower. This is known as a right of subrogation. The relationship between borrower and guarantor is a private matter, but the legal right to reclaim the money paid does exist. Both parties may benefit from taking independent legal or debt advice.
- Where can I get free help if I cannot pay?
StepChange (0800 138 1111), National Debtline (0808 808 4000), and MoneyHelper (0800 138 7777) all offer free, impartial debt advice. They can help you work out your options without any obligation to take out further credit.