While the old saying “Never mix business with pleasure” can be used too often, in the case of finance it is probably very relevant.  Whether lending money to a friend, helping out with a mortgage application or acting as a loan guarantor, it can get very awkward mixing your personal life, finance and business.  Are you sure you know what it all entails?

Loan guarantors are becoming more popular among close knit families and friends, and with the financial markets ever tighter at the moment, the banks are looking for as much protection as possible.  However, if you are in a position to act as guarantor for an acquaintance or family member, you need to be aware of a number of factors :-

• If the loan goes into default, the banks can chase you for the full outstanding balance.
• If payments are missed or delayed, the bank can chase your for payments.
• You may be in a position to act as guarantor now, but what if your financial situation changes, will it still be as safe for you to act as guarantor.
• You need firm ground rules before setting up such an agreement as there can be no doubts or confusion, as things could get very messy.
• Is your friendship or relationship with the other party strong enough to with stand possible added pressures if the loan goes wrong?
• Can the person taking the loan actually afford it?

What can often start as a favour for a friend has seen many great relationships ruined, and financial losses for both parties.  It is not advisable to mix business and your personal life, but if you have no other option, you need to ensure that you are covered, and there is as little chance of default as possible.

Friendships can soon disappear in the blink of an eye!