Sexually transmitted deb
Now that we've got your attention! Instances of sexually transmitted debt are on the rise again thanks to the credit crunch. Finance expert Matthew Nolan lays out the facts on how to avoid catching this costly condition.
Getting a business loan from any bank at the moment is harder than usual, with tougher approval criteria and increased security requirements. This security can include the need for a guarantor such as a spouse, friend or family member to support the loan.
There's nothing new in this, but the credit crunch means this guarantee is being required on more loans than ever and guarantors are increasingly open to giving this support in order to assist securing that elusive business loan.
But be warned, guarantors who provide their backing for debts of family and friends may end up losing a lot more than they bargained for. If the borrower can't or won't repay the loan, the bank can demand repayment from the guarantor.
This could mean a guarantor will be forced to hand over their savings, shares or home to repaying the outstanding amount borrowed, plus interest and recovery costs - which in total could be well above the original loan amount. If the guarantor can't repay this in full, they further risk bankruptcy.
Legal safeguards vigilantly protect consumer loans, but business loans don't have the same protection for borrowers, including small businesses and their loan guarantors. This means you need to be informed before providing a guarantee, having fully considered your position and the potential financial impact.
Being a loan guarantor to help someone you care about get a business loan may seem like the right thing to do at the time. But remember your potential liability will tyBefore you sign on the dotted line, ask yourself these five questions:
1. What could I lose by providing the guarantee (no mater how unlikely it seems)?
2. What do I personally gain by providing the guarantee?
3. What impact would a relationship breakdown with the borrower have to my willingness to provide the guarantee?
4. Have I got independent legal advice separately from the borrower?
5. Do I understand what I am signing?
If you're already the guarantor on a loan and you do find your guarantee being called upon, get professional advice without delay from a lawyer. This will help minimise or avoid damage to your financial position and credit history.
Like most diseases, it's far easier to prevent sexually transmitted debt than to treat it. If you're under pressure to guarantee a loan, it's often advisable to just say no and endure some short term pain. It's not that you don't care for your friend or relative, it's just that in the cold light of day it may simply be an unwarranted risk to your financial future.