What Is A Guarantor On A Lease?

What Is A Guarantor On A Lease
A guarantor is a person who will co-sign an apartment lease alongside a tenant, guaranteeing to pay the rent if the tenant fails to do so. The guarantor is usually a parent, family member, or close friend who is willing to be legally responsible for the rental apartment.

Who can be my guarantor?

Almost anyone can be a guarantor. It’s often a parent or spouse (as long as you have separate bank accounts), but sometimes a friend or relative. However, you should only be a guarantor for someone you trust and are willing and able to cover the repayments for.

What is a guarantor in the Netherlands?

What else do you need to know? –

Does your guest have enough money to fund their stay? If they do, then you do not need to act as guarantor. In that case, you only need to apply for a form (invitation letter) proving that your guest is living in private accommodation and have your signature legalised.What if your guest does not have enough money to fund his or her stay? Then you will also need to act as guarantor for your guest. If you act as guarantor, this means you are financially responsible for your guest. If you are married, or in a registered partnership, your partner is also financially responsible.Your guest may not stay in the Netherlands for longer than 90 days.

What is the difference between cosigner and guarantor?

#2 Important distinction between a cosigner and a guarantor – The terms cosigner and guarantor are often used interchangeably, but they follow a very different sets of rules, laws, and obligations. Cosigners have equal responsibility for payment of monthly rental costs, while a guarantor is generally sought for payment only when the property occupant is unable to make the rental payment.

  1. Cosigners are listed on rental agreements as having equal responsibility for making the rental payments, while the guarantor is listed as a secondary source.
  2. A cosigner is at a slightly higher risk than a guarantor since the landlord is allowed to immediately seek payment from a cosigner.
  3. On the other hand, the guarantor is normally not responsible until the landlord exhausts legal methods for obtaining payment from the primary leaseholder.

The guarantor does not have rights to access the apartment in the same capacity that a cosigner does. Cosigners are jointly responsible, guarantors are responsible after legal action is taken Some landlords blend the two terms into the role of “cosigner/guarantor.” Such agreement clauses clearly define the rights and responsibilities, which are usually closer to the classic definition of a guarantor rather than that of a cosigner.

For example, signing as a “cosigner/guarantor” does not allow the secondary individual rights to occupy the apartment. When someone is the guarantor on an apartment lease, they give their legal guarantee that rent on that property will be paid. They are also responsible for paying any fees or damages on that property beyond normal wear and tear.

If you have a solid lease agreement, then a guarantor and a cosigner will be responsible for financial damages. These would include:

Non-payment of rent by the tenant Late fees from the tenant Maintenance and other damages that may be the responsibility of the tenant

Rather than denying an applicant with a bad credit score or low income, you can mitigate your risk with a guarantor.

Why do I need a guarantor?

You might need a ‘guarantor’ so you can rent a place to live. A guarantor is someone who agrees to pay your rent if you don’t pay it, for example a parent or close relative. If you don’t pay your landlord what you owe them, they can ask your guarantor to pay instead.

If your guarantor doesn’t pay, your landlord can take them to court. Your landlord might want to check your guarantor is able to pay the rent in the same way they’ve checked your ability to pay. For example, by carrying out a credit check. There is a legal requirement for a guarantee agreement to be in writing.

The agreement sets out the guarantor’s legal obligations. If you agree your tenancy before your guarantor signs the guarantee agreement, there are extra rules. Contact your nearest Citizens Advice if this applies to you.

Who Cannot be a guarantor?

A parent or legal guardian cannot act as guarantor when applying on behalf of a child or dependent adult.

Can I use my boyfriend as a guarantor?

Guarantors – You may need a guarantor for your passport or other travel document application. Read the requirements below to check what you need for your type of application. You don’t need a guarantor if you’re renewing a passport. You only need a guarantor if you’re applying for a passport for the first time or you aren’t eligible to renew your passport,

Requirements for a regular (blue) passport submitted in Canada Requirements for a regular (blue) passport submitted outside Canada Requirements for military personnel applying for a regular (blue) passport Requirements for a certificate of identity or a refugee travel document

Although most of the guarantor section on the form can be completed by you or your guarantor, the following 4 fields must be completed by your guarantor :

Signature of guarantor Signed at Date I have known the applicant for (number of years)

In addition, your guarantor must

write on the back of 1 of the passport photos “I certify this to be a true likeness of (your name or your child’s name)”

They must also sign the back of the same photo.

for an adult application, sign and date the photocopies of each supporting identification document (ID) you submit to confirm your identity

This only applies to photocopies of ID and is not needed if you submit original documents.

Your guarantor can’t charge you money for this. You also can’t help the guarantor do any of the tasks listed above. Contact us if your guarantor needs help.

Does guarantor mean owner?

The Bottom Line – A guarantor is an individual that agrees to pay a borrower’s debt in the event that the borrower defaults on their obligation. A guarantor is not a primary party to the agreement but is considered as additional comfort for a lender. A guarantor will have a strong credit score and earn a sufficient income to meet the obligation.

  1. Having a guarantor on a loan agreement greatly benefits the borrower.
  2. It allows for an agreement to be approved much faster and often at a higher amount.
  3. In the event a borrower defaults, the guarantor must meet the obligation.
  4. If they do not, they are still liable and can have a lawsuit brought against them for the outstanding amount.

They will also see a negative hit on their credit score.

How do I avoid a guarantor?

Other options – Paying a larger deposit or more rent in advance You may be able to persuade your landlord to waive the need for a guarantor by offering them a larger deposit or 6 months’ rent in advance. This may give them the greater sense of security they are looking for.

However, neither option is ideal and you may not have the money to make such a suggestion. While the landlord is required to keep any deposit money in a deposit protection scheme, you could still be at risk of losing all or some of your deposit money if you are a joint tenant and one or more of the other tenants doesn’t pay what they owe to the landlord.

Paying a large amount of rent in advance can leave you open to fraud or problems getting the money back if the tenancy ends early for any reason. Help from your local council or a local charity Some councils offer rent deposit, bond and guarantee schemes.

help you pay rent in advance and a deposit; oroffer you a guarantor service.

Be aware, though, that you may well have to pay this money back in time. See it as a loan, not a gift. You may be able to get what is known as a discretionary housing payment (DHP). This does not have to be paid back. These are usually only available to people who already get housing benefit or universal credit and who are facing homelessness.

Local charities may be able to help you. The national charity Turn2Us has a search tool where you can search for grants local to you that you might be able to apply for. Also, whatever your age, make sure you are claiming all the benefits you may be entitled to. Lots of people don’t realise they can get extra help so be sure to check this out.

Turn2Us have a helpful benefits calculator you can use, or see if there is an advice centre near you. If you are an older person and unable to benefit from help available to younger people or students you may find AgeUK helpful. They have lots of online advice for older people and a helpline.

Legal expenses and rent guarantee insurance There are insurance companies that offer rent guarantee and legal expense insurance to landlords. If your landlord has this insurance they will be protected if you don’t pay your rent. You could offer to pay the premium for this type of insurance in return for your landlord waiving their requirement for a guarantor.

Be sure to find out how much it is first! Be aware though that it is probably a condition of any rent guarantee insurance that you, as the prospective tenant, are reference checked. The company providing the insurance may insist on you having a guarantor, irrespective of what the landlord thinks.

But it may be worth investigating this possibility. You should get some advice about the best suggestion to make to a landlord in your situation. For information about where to go for more help and legal advice, see our Help Directory, Alternatives to renting privately You could consider renting from a resident landlord – so typically you would share living room, bathroom and kitchen accommodation with them but have your own bedroom.

Although this will restrict your legal rights, (if you rent from a resident landlord that you share some accommodation with, they do not have to go to court to evict you) the upside is that resident landlords are often more flexible and typically don’t require a UK-based guarantor.

  • It’s not easy finding a resident landlord but you could try asking around among your friends and family to see if they know of anyone.
  • If you’re a student, have you thought of seeing if your university or college can offer you a 52-week accommodation option? Some institutions offer this to care leavers already.
You might be interested:  What To Eat When Nothing Sounds Good?

If you’re not a care leaver, but instead are estranged from your parents or have parents who can’t act as a guarantor, there’s no harm in asking if you could benefit from this option as well.

What are the two types of guarantors?

In general, there are two types of guarantors: personal guarantors and corporate guarantors. Each type has its own advantages and disadvantages, which should be carefully considered before making a decision.

Is a guarantor good?

Who needs a guarantor? – Anyone who needs credit but doesn’t have assets they can secure a loan against might consider having a guarantor. Equally, borrowers with poor credit scores, a low income, or who have no credit history, may be unable to find lenders willing to offer them a loan without a third party who will put their own finances forward as security.

It’s not just someone with past debt problems and a poor credit history who might need the help of a guarantor, though. Guarantors can help people who are struggling to find a lender willing to consider their situation, but they can also simply help a family member or friend to secure a larger loan or better terms and interest rates – and in the process, build up their credit history as they pay off the loan.

Bear in mind that guarantor loans can be an expensive way to borrow, though. Interest rates are usually much higher than standard personal loans.

Is it better to have a guarantor or not?

Common questions about becoming a guarantor – As a guarantor, you allow the equity in your own property to be used as additional security for the loan being taken out by your child or relative. The primary security for the loan will be the property being financed, but the lender will also take a mortgage over your property.

  • This mortgage will not support the loan directly but will be used to support a guarantee from you, as the guarantor.
  • While becoming a guarantor can seem like the right thing to do for your loved ones, you need to fully understand the risks involved before signing up.
  • As a guarantor, you effectively offer to take on responsibility for the home loan if repayments can’t be met.

So, it pays to consider how you would cope financially if the unexpected happens, and the lender turns to you to make good on the loan. Your own financial wellbeing could be compromised – at worst, you could risk losing your own home. It is also important to note your own ability to borrow will be reduced after you have agreed to act, so consider carefully your future plans and finance options.

The big plus for home buyers is the extra security a guarantor provides. It means you may be able to secure a home loan with just a small deposit – or even no deposit at all. It could also mean avoiding Lenders Mortgage Insurance – a saving that can run into thousands of dollars. The lender will still check you can comfortably manage the loan repayments, but having a guarantor can fast-track you into a place of your own.

The role of a guarantor is generally limited to the immediate family members of those seeking finance. Normally, this would be a parent but guarantors can include siblings and grandparents. Some lenders will allow extended family members and even ex-spouses to be a guarantor to a loan, but this varies depending on the lender.

Your local Mortgage Choice broker can help you understand which lender best suits your needs. Plenty of lenders offer guarantor home loans. They come under a variety of names including ‘family pledge loans’. A guarantor home loan doesn’t have to come with a higher interest rate. In many cases a guarantor loan will have the same rate as a regular home loan.

The main point is to be sure the loan is right for your needs. After all, interest rates can change. But the features of a guarantor home loan will remain in place regardless of rate movements. The lender will still check that you can comfortably manage the mortgage repayments, but a guarantor home loan can fast-track you into a place of your own.

  1. Each lender works differently, but in many cases you can nominate how much of the loan you’re prepared to guarantee, and how long you wish to act as guarantor for.
  2. When deciding these elements, it’s worth making a realistic assessment of the borrower’s financial track record and job security, even if you are comfortable that the borrower is well-equipped to manage a home loan.

Often in these situations, emotion may cloud your financial judgement so it is vitally important that you seek independent legal and financial advice before accepting the role – in fact, most lenders will insist on this prior to accepting a guarantee.

  1. A security guarantor will stay on your mortgage until your loan is refinanced, special arrangements with your lender are in place or the loan is paid off.
  2. In some cases it is possible for a guarantor to request a release from the loan in circumstances where you have built enough equity in your loan and have shown a history of servicing your mortgage repayments.

The time frame for this can obviously vary as this can take a number of years depending on the original loan amount, loan type, repayments made and whether the property’s value has increased. In some cases, depending on your lender’s specific policy and the terms of the loan, you may need to pay additional fees when requesting to release the guarantor.

Typically the guarantor is not able to be released until you have built up equity in your loan of at least 10% or 20% to avoid paying LMI, though this can vary depending on lender requirements. When releasing a guarantor this will usually require an internal refinance. You can build the equity on your loan by making extra repayments to bring the loan balance down quicker or looking at ways to increase your property’s value.

It’s important to understand that depending on lender requirements, releasing a guarantor involves refinancing your loan and can’t be done automatically, therefore your lender may need to review your financial situation during the refinancing process.

With a guarantor mortgage, you can borrow funds to purchase a property with a small deposit, under 20%, and avoid paying LMI. In some cases, you may be able to get a home loan with no deposit at all using a guarantor. It is best to speak with your Mortgage Choice broker, who can go through your situation and understand how much you can borrow with a guarantor.

As you can see, there’s much to weigh up, and it’s definitely worth speaking with us about becoming a guarantor. We understand the different requirements of each lender and will cut through the clutter to find the loan that suits your needs, as well as the needs of your loved one.

How do you ask someone to be a guarantor?

Blog : How to ask someone to be your guarantor Last post: May 18, 2017 If you can’t approach your family to guarantee your loan, you may need to take a considered approach to asking someone else to be your guarantor. are a helpful product for those of us with a slightly patchy credit record or tricky financial situation, who are confident they can meet loan repayments but are struggling to convince lenders of this fact.

  1. If you’re fortunate enough to have a close friend of family member who knows you well and understands your financial situation, asking them to guarantee your loan often means little more than a quick signature and a formality.
  2. After all, they know that you wouldn’t land them with a debt.
  3. However, if your financial past or credit history are cause for concern for your friends or family, you may need to work a little harder to convince a guarantor they can trust you to take care of your loan.

Equally, if you don’t have a family member in a position to act as your guarantor, you may need to look further afield and take a different approach to asking an individual to guarantee your loan. If you are facing this dilemma, these tips could help you convince your guarantor to help you secure your loan: 1.

Do it face to face Asking someone to be your guarantor is all about trust, so don’t ask over the phone or via WhatsApp. Instead, meet them in person to show them that you are serious about taking on finance and committed to using it responsibly.2. Don’t assume they’ll say yes Asking an individual to guarantee your loan is a big favour to ask, so don’t approach your prospective guarantor as if they’re going to say yes.

Instead, explain that you know you are asking a big favour and demonstrate the consideration and respect you intend to show them through the course of the loan period.3. Present a repayment plan The most important part of asking somebody to be your guarantor is demonstrating that you have a workable repayment plan in place.

  • Bring along a spreadsheet which shows exactly how much you’ll be repaying and when, alongside your income and budget so they can feel confident that you can manage the loan, without it impacting on them.
  • Have you had to convince somebody to be your guarantor before? How did you approach asking this tricky question? Share your experiences with other readers below.

This calculator shows what your monthly payments would be for a given loan, where interest is compounded monthly. Payment protection insurance is excluded We use cookies to enable functionality on this site. Without these required cookies, the site may not function correctly.

  • We recommend accepting optional cookies to enhance your experience.
  • These enable video playback and allow us to analyse how our site is being used.
  • You can change your cookie preferences at any time by visiting our page.
  • Once you’ve made your choice, we won’t ask you again unless you change browser or clear your browsing history.

: Blog : How to ask someone to be your guarantor

What are the risks of going guarantor?

You may have to pay back the entire debt If the borrower can’t make the loan repayments, you will have to pay back the entire loan amount plus interest. If you can’t make the repayments, the lender could repossess your home or car if it was used as security for the loan.

What are the pros and cons of guarantor?

Why go guarantor? – Being a guarantor may be a significant way to help someone you trust purchase a home. However, it also contains inherent risks to the guarantor, such as being responsible for paying back the entire loan if the borrower can’t. As well as financial risks, there may also be risks to relationships. What is the underlying goal you are trying to fulfill as a potential guarantor? Consider whether your aim is to help out a family member financially or specifically help them into home ownership. Are there other ways to achieve the goal? Instead of going guarantor on a loan, could you gift money or loan funds directly? How could going guarantor impact your own long-term goals such as retirement, government benefits, and/or aged care plans? How could going guarantor impact your family relationships? Could going guarantor impact family dynamics with other family members?

You might be interested:  What Type Of Biological Molecule Is Dna Helicase?

What does a guarantor have to pay?

A guarantor is usually a family member over the age of 18, who is in a strong financial situation. When a person agrees to become a guarantor, they will be responsible for paying the rent, if the tenant isn’t able to pay. They will also have to pay for any damage to the property.

Who signs under guarantor?

A guarantor is a person who will co-sign an apartment lease alongside a tenant, guaranteeing to pay the rent if the tenant fails to do so. The guarantor is usually a parent, family member, or close friend who is willing to be legally responsible for the rental apartment.

Can a friend go guarantor?

What are guarantor home loans and how do they work? – As the name suggests, guarantor home loans are all about giving a lender a firm guarantee that you are a worthy loan-er. How? Your guarantor is a close family member such as a parent or sibling (although some lenders will allow for a friend or colleague) and their house.

  • Or, more specifically, the lender’s guarantee is a parent or sibling’s equity in their home.
  • This equity is the security a lender will usually ask from you – the borrower – and as it must cover 20% or more of your new house, you don’t need to pay LMI.
  • As a result, this means you don’t need a deposit to buy a home.

Not bad, right?

How can a guarantor protect themselves?

THE PROTECTION OF A GUARANTOR’S RIGHTS IN A LOAN TRANSACTION AND THE EXTENT OF HIS LIABILITY BY: IGECHI ICHEGBO ESQ. INTRODUCTION Loans are generally secured or collateralized by assets which include floating and fixed assets, shares of the company, cash in bank, and in some cases personal guarantee of individuals.

In several circumstances, the borrower might not have enough assets or any collateral for the loan. It is on such occasions that such the borrower is compelled to bring in a third party who can stand or use his assets to secure the loan facility. Such persons are referred to as “Third Party Guarantor”.

The contract binding the borrower, the lender and the guarantor is generally called “Contract of Guarantee” or “Unconditional Personal Guarantee and Indemnity”

  • This article expounds on the responsibilities of a guarantor, the risks involved and how to protect guarantors’ rights and interests in loan transactions.
  • A. Guarantee:

A proper definition of Guarantee is an undertaking to answer for the payment or performance of another person’s debt or obligation, in the event of default by the person primarily responsible for it. This definition of guarantee has gotten a judicial backing as elucidated in the case of Chanmi v.U.B.A Plc 6 NWLR 474 at 478 Ratio 1, where the Supreme Court of Nigeria defined a guarantee thus: “Guarantee has been defined as a written undertaking made by one person to another to be responsible to the other if a third person fails to perform a certain duty, e.g.

  1. Black’s Law Dictionary 7 th Edition at page 711 defined Guarantee as “an assurance that a contract or legal act will be duly carried out.”
  2. B. Guarantor:
  3. According to the Black’s Law Dictionary 7 th Edition page 711, a guarantor is defined as “one who gives security for a debt.”

A guarantor’s liability does not begin until the principal debtor is in default. Furthermore, a guarantor is a term used to describe an individual who promises to pay a borrower’s debt in the event that the borrower defaults on his loan obligation by pledging his assets as collateral against the loan.

  1. Tripartite Deed of Legal Mortgage: It is a legal document in which the guarantor who is the mortgagor transfers his interest in assets to the mortgagee/creditor for the purpose of securing a loan given to the Borrower. Once there is an agreement between the parties mentioned above, a tripartite legal mortgage has been created. A standard tripartite legal mortgage involves the mortgagee (lender), mortgagor (guarantor), and the borrower of the loan.
  2. Deed of All Assets Debenture: This is a charge over the entirety of a company’s assets in favour of a lender or creditor transferring the temporary interest to the lender/creditor. The deed of all asset debenture can only be discharged upon the final liquidation of the loan availed to the borrower or debtors as the case may be.
  3. Surrender of Shares: A guarantor may undertake to relinquish his shares, to serve as security/collateral for the loan in the event the borrower fails to liquidate his debts.
  4. Post-dated Cheques: This is a situation where a guarantor undertakes the liability of a debtor, by issuing post-dated cheques in favour of the creditor to liquidate full or a part of the loan that was granted to the debtor in event of default.

GUARANTORS LIABILITY TO THE CREDITOR 1. Crystallization of Liability upon Borrower’s Default: The guarantor to a facility automatically becomes liable to the creditor upon the default by the borrower, and it is well established that failure of the borrower to liquidate the facility as agreed crystallizes the right of the creditor against the third person guarantor.

In the case of C.B.N v Interstella Comm. Ltd.7 NWLR Page 294 at 308, the Supreme Court of Nigeria held that; “A guarantor is technically a debtor because where the principal debtor fails to pay his debt, the guarantor will be called upon to pay the money owed. However, the fact that the obligations of the guarantor arise only when the principal debtor has defaulted in his obligations to the creditor does not mean that the creditor has to demand payment from the principal debtor or from the guarantor or give notice to the guarantor before the creditor can proceed against the guarantor, nor does the creditor have to commence proceedings whether criminal or civil, against the principal debtor unless there is an express term in the contract requiring him to do so.” Furthermore, the liability of the guarantor crystallizes the moment a default occurs on the part of the borrower as seen in the Supreme Court decision in Fortune International Bank Plc v.

Pegasus Trading Office (GMBH) &2 Ors (2004) 4 NWLR (Pt.863) page 369 at 389 Para D-E thus: “The fact that the obligation of a guarantor arises only when the principal has defaulted in his obligations to the creditor does not mean that the creditor has to demand payment from the principal or from the surety or give notice to the surety.

  1. Nor does he have to commence proceedings against the principal, whether civil or criminal unless there is an express term in the contract requiring him to do so.” 2.
  2. Guarantee Creates A Separate Contract Between The Guarantor And The Creditor: Upon the execution of a contract of guarantee, there exists a separate contract between the creditor and the guarantor, which can be enforced by the creditor when there is a breach without recourse to the borrower, who is the principal debtor.

Thus this is as expressed emphatically in the case of UBA Plc v Chami (supra) Page 479 Ratio 2 where the Court held as follows; “Where a person personally guarantees the liability of a third party by entering into a contract of guarantee or suretyship, a distinct and separate contract from the principal debtor’s is thereby created between the guarantor and the creditor.” 3.

  1. Guarantor’s Direct Liability To A Creditor: It is pertinent to state that once a debt has accrued and a guarantee has been called upon by the creditor, the guarantor becomes directly liable to the creditor independent of the borrower’s liability to the creditor.
  2. The creditor can choose to proceed to recover the loan from the guarantor without approaching the principal debtor.

A guarantor is directly liable to liquidate the debt of the principal borrower, in the event that the principal borrower defaults or refuses to honour his repayment obligation. In fact, it is of no moment whether or not the guarantor benefited from the loan granted to the principal borrower; it is sufficient that there exist a guarantee from the guarantor and the principal borrower has defaulted in his repayment obligation.

In the case of Crown Flour Mills Ltd v Olokun (2008) 4 NWLR at page 298 Para F-H the Court held thus: “.in a contract of guarantee, the law has moved to the center to make right of the creditor to so proceed against the guarantor less conditional. a creditor is entitled to proceed against the guarantor without or independent of the default of the principal debtor.” Also in UBA Plc v Chami (supra) page 479, Ratio 3 & 4, the Court held that: “A contract of guarantee can be enforced against the guarantor directly or independently without the necessity of joining the principal debtor in the proceedings to enforce the guarantee.

Thus, a surety may be proceeded against without demand from him and without first proceeding against the principal debtorwhen the principal debtor fails to pay his debt, as in the instant case, the liability of the guarantor under the guaranty crystallises.

The right of the creditor is therefore not conditional as he is entitled to proceed against the guarantor without or independent of the incident of the default of the principal debtor.” STEPS A GUARANTOR MUST TAKE TO PROTECT HIS RIGHTS IN A CONTRACT OF GUARANTEE It is appropriate for every guarantor to take certain steps so as to protect himself to reduce the risk of standing as a guarantor.

As earlier discussed, there are a number of risks associated with the role of a guarantor, it is only proper that we have a second look and consider the factors to look out for before a person can accept being a guarantor to a prospective borrower, these factors are listed below:

  1. How does the borrower intend to repay the loan granted to him? A guarantor has the responsibility to conduct a background check or carry out a feasibility study of borrower’s projection with respect to the projects or business to which the borrower intends to apply the loan, so as to determine how the borrower intends to liquidate the loan.
  2. What borrower’s asset is available to indemnify the guarantor in case of any default in the loan and the guarantor is obliged to repay the creditor’s loan? The Guarantor has a responsibility to assess or value the borrower’s assets available to indemnify him where the borrower defaults in the loan and the guarantor is obliged to repay the creditor’s loan. Furthermore, the guarantor must take proper steps to ensure that the borrower’s assets available to indemnify him are not encumbered or not attached to any legal issue that will frustrate the guarantor.
  3. Whether the guarantee is for a fixed amount or entire loans granted to the borrower by the creditor? The guarantor is advised to properly examine the loan documents or contract so as to ascertain the extent of his liability. Where the guarantee is for a fixed amount without interest, the guarantor is liable to the creditor only to the extent of his guarantee without being liable for accrued interest, but where the guarantee is for the entire loan granted to the borrower, the guarantor is liable to pay the entire loan sum where the borrower defaults.
  4. In the event of a default on the side of the principal debtor, does the guarantor have the financial capacity to undertake the liabilities guaranteed against? The guarantor aside from pledging his immovable assets for the discharge of his obligation under the loan arrangement, the guarantor must be able to ascertain that he has the financial capacity to liquidate the borrower’s debt in the event of the borrower’s default without losing his immovable assets in the discharge of his guarantee obligation.
  5. What asset does the guarantor intend to put up as security or collateral? The guarantor must diligently identify the assets which he intends to nominate as security/collateral for the borrower’s loan. The assets so identified must be such that can adequately discharge his obligation as the guarantor under the loan agreement.
You might be interested:  What Are Side Effects Of Breathing Cat Urine Ammonia?


  1. Right to Discharge: A guarantor’s obligation to liquidate the debt of the primary debtor co-exists with the existence of the debt. Hence where the principal debtor has completely liquidated his debt or where the guarantor steps into the shoes of the principal debtor to liquidate the debt, he is discharged from the Guarantee or he can immediately liquidate the debt before interest accrues and eventually escalate the debt.
  2. Right to Limited Undertaking and Liability: The guarantor’s right to liquidate the principal debtor’s indebtedness only to the extent of his undertaking. Where a guarantor’s undertaking is limited to a certain sum of money, he is under a legal obligation to discharge the guarantee only to the extent of his undertaking. Hence the creditor cannot recover from the guarantor any sum beyond the guarantor’s undertaking. For example, a guarantor can exclude/insist on the non-payment of the debt interest save for the exact money loaned or a specific sum.
  3. Right to Set-Off: A guarantor has the inherent right to a set-off where there is a corresponding or mutual responsibility between the guarantor and the creditor. Therefore, where the creditor is also indebted to the guarantor, the guarantor can exercise his right to set-off his liability against the creditor’s liability to him.
  4. Right to Proper Account on Proceeds of Sale: In the event that the guarantor’s asset is disposed of in the repayment of the principal debtor’s obligation, the guarantor has the right to demand a detailed account on the proceeds of the sale so as to ensure that the assets were sold at the best market price. Consequently, he has a right to request a refund where the asset sold is more than sufficient to completely liquidate the principal debtor’s indebtedness.

PROTECTION OF A GUARANTOR The obligation of becoming a guarantor simply implies that he will be liable for the repayment of the loan in event of default by the debtor to liquidate his indebtedness. In most cases, the guarantor suffers a great deal. In order to avoid this, the guarantor must take steps to prevent or protect himself even when he has consented to a guarantee contract.

  1. Reduce Liability: A guarantor should always try to reduce as much as possible to the amount guaranteed in the contract of guarantee, so as to have a limit to the guarantee. This would ensure that the guarantor accepts liabilities within his means.
  2. Personal Scrutiny and Execution of Documents: A guarantor should make sure the loan agreement and all other relevant documents relating to the loan granted to the borrower are personally and properly scrutinized by him. Also, a lawyer should review same or an expert in the field for the purpose of the loan. The guarantor should also make sure he has copies of all relevant documentation and confirm all necessary information about the credit/loan agreement. This is to ensure an informed decision to guarantee a loan granted to a borrower.
  3. Carry out Background Checks: A guarantor should carry out a thorough background check on the purpose of the loan and the most importantly the alter-ego of the company or entity he is standing guarantee for, in order to be certain that he is a person of reputable character and the ability of the borrower to utilize the loan for the purpose for which it was given.
  4. Ensure Good Relationship with the Borrower: There is need for a prospective guarantor to access his relationship with the borrower to avoid a situation where the borrower cannot be located by either the creditor or the guarantor when the loan crystallizes into indebtedness. This is important because the guarantor also reserves the right to proceed against the principal debtor upon the discharge of the indebtedness to the creditor. There is a need for a guarantor to guarantee a loan granted to a person with close proximity to the guarantor.
  5. Good Synergy between the Borrower and the Guarantor: It is essential to go through the terms of the agreement in detail and discuss it with the borrower so as to avoid future complications. This will further strengthen the resolve of the guarantor towards making a decision to enter into a guarantee contract.
  6. Co-Signatory to the Loan Account: The guarantor must also request that he is a co-signatory to the loan account so as to help regulate and monitor the account. This is important because the guarantor can supervise the usage of the loan and ensure same is not diverted for other purposes asides from the reason it was granted.

TERMINATION OF A GUARANTEE There are instances where a guarantor may choose to exercise his right to terminate the contract of guarantee. This calls for concern when fraud is detected, misappropriated or for other personal reasons. It must be borne in mind that it is very difficult to terminate a contract of guarantee, especially when the borrower has already taken benefit of the loan and expended the money for other purposes.

In such instance, a creditor will never allow, consent or approve the termination of the contract of guarantee, except the loan has been fully repaid or a replacement is produced and certified to be in the same standard with the outgoing guarantor because a creditor must be placed in the position as at when the contract of guarantee was executed.

Nevertheless, below are factors that can lead to the request for termination of a contract of guarantee.

  1. Misappropriation of the Loan: A guarantor may terminate the guarantee contract where the principal debtor misappropriates the credit for other purposes other than for which the credit was granted to the knowledge of the creditor. For Example: where a borrower obtains a loan granted to him for business purposes but decides to direct same to seek political elections; in such a circumstance, the guarantor is obliged to bring same to the notice of the creditor and demand for a release of the obligation in the guarantee, after the guarantor must have ensured a replacement of the guarantor or the loan has been repaid till date.
  2. Misrepresentation and diversion of loan: Where the guarantor was deceived into entering a guarantee contract, such a contract may be vitiated on the ground of misrepresentation and fraud. This is usually applicable where the guarantor is shielded from certain clauses or arrangements in the loan agreement. where such is discovered by the guarantor, the guarantee agreement ought to be terminated, but before this can apply, it must be proven that the creditor is aware.
  3. Coercive Consent: Where the guarantor is coerced or induced into giving consent to guarantee a loan on behalf of a borrower, it vitiates the guarantee. Where the consent of the Guarantor was obtained by duress, the guarantor may terminate the guarantee contract on such basis. This would apply especially where there is proof that the creditor is culpable in the inducement or duress.
  4. Fraud: Where a guarantor’s assent to a guarantee has been procured by fraud by the person to whom it is given and there is proof to that effect, there is no binding contract. Fraud in this context may consist of suppression, concealment or alteration of the contract without the knowledge of the guarantor.

CONCLUSION Conclusively, being a guarantor should not be taken as a mere formality because it is a commitment that he is liable to the creditor, upon failure of the debtor to perform his obligation. The guarantor should be willing to perform his obligation, as the failure to do so could amount to the creditor taking up recovery actions against him.

  • In such an event, a guarantor who has taken all precautionary steps as suggested in this article can invoke any of the options stated above to seek redress against the debtor and discharge his liabilities.
  • Finally, a person should never stand as a guarantor to an entity, company or persons not well known, because it is as dangerous as the entire loan itself.


Can a guarantor withdraw his guarantee?

A guarantor may request that it is released from its obligations under a guarantee even though the principal debt has not yet been repaid in full. A guarantor can request its release at any time and it is up to the lender to decide whether or not it is prepared to grant the release.

What is a declaration of guarantor for proof of identity Ontario?

Additional Information –

Form Number 023-sr-ld-040
Title Declaration from a Guarantor
Description An Ontario Photo Card (OPC) or driver’s licence applicant must provide an identity document to prove signature. If the applicant does not have a proof of signature document, the Declaration from a Guarantor form will allow a guarantor to vouche for the applicant’s signature.

Can a friend go guarantor?

You may have to pay back the entire debt – If the borrower can’t make the loan repayments, you will have to pay back the entire loan amount plus interest. If you can’t make the repayments, the lender could repossess your home or car if it was used as security for the loan.

Who is usually the guarantor?

The Bottom Line – A guarantor is an individual that agrees to pay a borrower’s debt in the event that the borrower defaults on their obligation. A guarantor is not a primary party to the agreement but is considered as additional comfort for a lender. A guarantor will have a strong credit score and earn a sufficient income to meet the obligation.

Having a guarantor on a loan agreement greatly benefits the borrower. It allows for an agreement to be approved much faster and often at a higher amount. In the event a borrower defaults, the guarantor must meet the obligation. If they do not, they are still liable and can have a lawsuit brought against them for the outstanding amount.

They will also see a negative hit on their credit score.

Who can be my guarantor in UK?

Who can be a guarantor – Guarantors are usually a relative or close friend of the tenant, but they don’t have to be. Guarantors usually need a good credit history and income or savings above a certain amount. A landlord might reject a guarantor or ask for more information if, for example, they:

are retired live abroad don’t own a property

Your landlord might carry out a credit check on your guarantor or ask for proof of their income, savings or other financial details.

Who signs under guarantor?

A guarantor is a person who will co-sign an apartment lease alongside a tenant, guaranteeing to pay the rent if the tenant fails to do so. The guarantor is usually a parent, family member, or close friend who is willing to be legally responsible for the rental apartment.