Being a guarantor to a friend or family is not something that should be taken lightly. Guarantor has whole loan on his back, because he must have money to repay it, once the borrower losses the ability to do that. So, yes this article will be focused on less highlighted role in guarantor loans, on guarantor.
Guarantor is person who acts as a fail safe in guarantor loan. He will repay any chinks of the loan which borrower can’t. But being a guarantor is risky business and it can get you in a lot of financial trouble so ask yourself several questions before agreement to be one:
If you want to help your friend or a member of your family but you are not certain in their ability in repayment of that loan then refuse an offer to be a guarantor. Instead of being guarantor offer them your own loan, which can be without any kind of interest. But don’t just give that to them, but create law binding contract that should be signed by both parties.
Being a co-borrower carries same risk as being guarantor and it is not advised. If you want to be a good person and accept an invitation of being guarantor to someone, they the best way to protect yourself is to take them as your guarantor as well. Loan companies will have no problems in accepting this kind of deal. It basically comes down to both of you taking some amount in loan, and both of you being guarantor to each other. This makes it futile to skip on paying your loan and leaving it all to guarantor. If you do that in this case then that guarantor can stop paying his own loan and you will have to repay it. So it can’t hurt anyone in that situation. Trust is necessary, but trusting someone with thousands of dollars is not smart move.
You should also ask for written agreement which will allow you to gain information about financial decisions of the debtor which would be provided by him, amount of money in debtor’s account and so on.