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GOING GUARANTOR FOR SOMEONE 7/2/2007

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GOING GUARANTOR FOR SOMEONE

If you are ever asked to be guarantor to someone else’s debt … give it very careful consideration.

The ideal answer should be an emphatic NO.

There are cases upon cases of people, who have acted as ‘guarantor’, losing all of their assets.

The typical case is where the mother and/or father acts as guarantor for their children, either for their first house
or for their new business. There have been disastrous results with the parents losing their own home.

Remember that when the borrower, who you have acted for as guarantor, cannot repay the debt or make their repayments, you are responsible. The lender will come to you demanding payment.

Lenders usually ask for a guarantor when they are unsure about the borrower’s ability to repay the loan.
This should tell you something. They are supposedly the ‘credit experts’ in assessing a person’s ability to repay
a loan.

Do not assume the borrower’s assets will cover the debt. The lender has concerns about the value of the assets or
you would not have been asked to be guarantor.

If you decide to act as guarantor, be sure that you receive a copy of the loan agreement and read it carefully.

Ask to have your obligations explained to you in detail. Have answers to your questions put in writing and signed.
If you are unsure of anything, seek independent legal and financial advice.

Never sign anything on the spur of the moment.

Ask yourself :

is the borrower a responsible person and do they have the ability to repay the loan
how stable is their employment
what happens if the borrower loses their employment or becomes sick
can you afford to repay the total debt if you are required to repay it in total
what financial position will you be left in if you have to repay the debt

If you are called on to pay the debt … seek legal advice immediately.

Author Name
Kevin Nowland -

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