How helping a friend can turn into a nightmare – experts warning over loan schemes in Hartlepool

Hartlepool Citizens Advice staff. Picture by FRANK REID
Hartlepool Citizens Advice staff. Picture by FRANK REID

Bosses at a vital Hartlepool advice lifeline are warning people they could end up saddled with mountains of surprise debt.

Hartlepool Citizens Advice Bureau is alerting people about the risks of becoming guarantors for loans for friends or relatives.

Guarantor loans can turn helping a friend into a nightmare

Joe Michna, Hartlepool Citizens Advice Bureau

It comes as a new report from the national Citizens Advice warns guarantor loans can be “just as damaging” as high interest payday loans.

Hartlepool Citizens Advice Bureau manager, Joe Michna, said: “Guarantor loans can turn helping a friend into a nightmare – and we have a few recent examples of clients who have gotten themselves into difficulties after signing as a guarantor for a friend or relative.

“Many people acting as a guarantor are doing this to help a friend or relative but do not fully realise the consequences and implications if payments on the loan are missed.”

Hartlepool CAB, based in Park Road, says it has seen a drop in payday loan enquiries since new regulations were introduced last year.

But the service is worried guarantor loans will be used as an alternative.

The loans, which have average interest rates of up to 46%, see the borrower give the name of someone who is then responsible if the borrower does not keep up the payments.

The report, A Problem Shared, says 43% of guarantors nationally who sought help from Citizens Advice were unsure about the extent of their responsibilities. Guarantors can still be liable to pay off a debt even if the borrower dies.

Mr Michna added that because guarantors are not classed as customers by regulators, they miss out on basic protections.

He said: “They have also not normally talked things through with their relative or friend.

“They assume that everything will be fine without realising the legal situation should payments be missed on the loan.

“Consumers need better regulation of the guarantor loan market. Anyone struggling with this kind of debt can come to Citizens Advice Hartlepool offices for help.”