How to protect yourself as a guarantor
Source:directcapital.com
If you agree to be a guarantor , then you are taking on a serious risk and will be responsible for paying a debt if the borrower can ’t or does not. This is far more than giving someone a character reference. According to
http : / / www.cab .org.nz, it is important to know that , if the borrower defaults , the lender is entitled to come after the guarantor ( you) for repayment before they go to the borrower .
The guarantee must be in writing and must be signed by you as guarantor . It should specify: the amount of money for which you are liable , the circumstances in which you might have to pay , for example , if the debtor defaults , and how long your obligation will last , for example , until the debtor repays the loan in full .
Try to limit your liability
Many guarantees cover all of a borrower ’s obligations to a lender ( these are called “All Obligations ” guarantees) . You can ask that the guarantee agreement limits the amount you guarantee.
Another way to limit your liability might be to cancel the guarantee, which can generally be done at any time . While this does not release you from the original guaranteed loan amount it does mean that you won’t be responsible for any additional debt which the borrower incurs after you have cancelled .
Make sure you receive all the relevant documentation
When you are guaranteeing a loan or other consumer credit contract , the lender must give you a copy of key information about the credit agreement so that you know what your obligations as a borrower are. They must also give you a copy of the guarantee contract ( a contract of guarantee must be in writing and must be signed , otherwise it cannot be enforced ) . For a credit contract , they have to do this before the guarantee contract is signed .
Source:directcapital.com
If you agree to be a guarantor , then you are taking on a serious risk and will be responsible for paying a debt if the borrower can ’t or does not. This is far more than giving someone a character reference. According to
http : / / www.cab .org.nz, it is important to know that , if the borrower defaults , the lender is entitled to come after the guarantor ( you) for repayment before they go to the borrower .
The guarantee must be in writing and must be signed by you as guarantor . It should specify: the amount of money for which you are liable , the circumstances in which you might have to pay , for example , if the debtor defaults , and how long your obligation will last , for example , until the debtor repays the loan in full .
Try to limit your liability
Many guarantees cover all of a borrower ’s obligations to a lender ( these are called “All Obligations ” guarantees) . You can ask that the guarantee agreement limits the amount you guarantee.
Another way to limit your liability might be to cancel the guarantee, which can generally be done at any time . While this does not release you from the original guaranteed loan amount it does mean that you won’t be responsible for any additional debt which the borrower incurs after you have cancelled .
Make sure you receive all the relevant documentation
When you are guaranteeing a loan or other consumer credit contract , the lender must give you a copy of key information about the credit agreement so that you know what your obligations as a borrower are. They must also give you a copy of the guarantee contract ( a contract of guarantee must be in writing and must be signed , otherwise it cannot be enforced ) . For a credit contract , they have to do this before the guarantee contract is signed .