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Can a person other than a parent or close relative provide guarantees to loan applications?

Thursday, August 20, 2015

Yes,  there are some lenders who will allow guarantors to not be personally related to applicants.

With most lenders, the guarantor can be a parent, child, de facto/spouse, company, Aunt or Uncle, or Parent-in-law of the borrower, but with one or two lenders even a friend can provide the guarantee.

Whenever a guarantee is required, its important for the guarantor to considerer obtaining independent legal advice. It may also be a requirement of the lender.

The most common type of guarantee at the moment is a security guarantee, where the guarantor provides their property as an additional security for the bank, often secured by a first or second mortgage. This is commonly done to avoid the borrower incurring lenders mortgage insurance (LMI).

Less common today are income support guarantee’s. The borrower must normally show their income is sufficient to cover the loan against their property, plus the second loan secured against the guarantors property.

Please contact Russel Shaw, one of our credit advisers, for more information. Got your own question? Ask us now!