Jean retired 3 years ago and was enjoying her ‘golden years’. She and her husband worked hard all their lives to bring up their children, pay off the house and finally go on a round-the-world trip.

Unfortunately, Jean’s husband passed away. One day her son James asked Jean to be a guarantor for his home loan as the credit provider would not grant the loan unless it was guaranteed. James wanted to buy a house for his wife and children after renting for many years.

Jean thought about it and finally agreed. Being his mother, she thought she had a duty to help him out where she could. She and her husband had helped James in the past and he had always paid them back. Jean couldn’t see any harm in this now.

She went to the bank with James where the bank manager explained what it meant to go guarantor. Jean signed a guarantee and was happy to be a guarantor for her son’s home loan.

Over the next few years interest rates increased. James and his wife had another child. His wife wasn’t working and they were unable to keep up with the loan repayments. He re-negotiated the loan with the bank but within a few months was behind with the loan re-payments. The bank asked Jean to make the repayments for James but she could not afford them on her retirement income.

The bank then obtained a court judgment against James and Jean. James could not pay the money owed, so the bank obtained orders to sell his home. As prices had fallen, the money from the sale of James’ home was not enough to repay all of the debt owed to the bank.

Jean could not afford to pay the remaining amount of the debt. The bank then obtained orders to sell Jean’s home.

Fair Trading advises all prospective guarantors to think carefully and see an independent financial adviser about the risks before going guarantor.