Guarantors of Loans

If you have agreed to be a guarantor for a loan this means that you promise to repay the loan if the person who took out the loan does not keep up the repayments. You may be asked to guarantee a loan so that the lender has extra "security" should the borrower fail to repay. You will be asked to sign an agreement with the lender.

If the borrower stops the payments you could be asked to pay instead and if you refuse the lender can take you to court.

You should therefore only agree to be a guarantor if you know that you will be able to repay the loan if necessary.

You might also want to think about entering into a separate written agreement with the borrower to ensure that if you have to repay their loan they will repay you, this is called "indemnity".

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