Why I am happy to guarantee my son will repay his loan
The Mail on Sunday, 09 Dec 2014
For most parents, sorting out their own finances is only half the battle. There are also children to help at some stage.
This could be the way of handing over cash, investing for their future, or giving them the right tools to manage their own finances
Ideas to help jump start savings for children include opening a tax-efficient Junior ISA - the allowance for which is £4,000 this tax year. The child becomes responsible for the money when they hit 18.
You can also save into a pension for a young person - up to £2,880 each year and benefit from tax relief on top, setting them up with a decent nest egg for when they are older.
To find out more about tax-free ways to pass money to children, visit hmrc.gov.uk/inheritancetax.
For parent Kath Saward, from North Mymms in Hertfordshire, the trick was to back her son Jordan when he needed to borrow money
Jordan, 23, runs his own business where he is contracted by estate agents to film the inside of houses for sale so prospective buyers can do a virtual 'walk through' of a property before choosing whether to see it in person
He needed a cash injection for his venture and instead of borrowing the money from his Mum, he suggested taking out a £2,000 loan so he could build a history of reliably paying off debt.
He did this via Amigo, a company that lends to individuals if they are backed by a friend or relative willing to be responsible for the debt if they default.
Kath, 49, says:
Jordan had a poor credit score at the time because he didn't have any debt against his name.
The idea behind a guarantor loan is that if a friend or family member believes a person is good for the money - enough to add their name to legal paperwork - then the lender will take the same view.
'I was happy to be his guarantor as I know what his income is and that he is capable of repaying the loan,' says Kath. 'And he knows he can't mess about because if he did it would affect me.'
Amigo promises to prioritise chasing the original borrower for late payments and to never repossess a guarantors home or force them to sell it.
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