Certain loans require the loan applicant to secure a guarantor, who is a person who will pay the loan in case the original loan applicant cannot repay it. Usually, if you become a guarantor, it would be for a close and trusted relative, like a parent, a child or a spouse. The position of guarantor should not be undertaken lightly as it involves a high financial responsibility or burden.

Guarantors themselves may want to take loans and worry that their position may affect their chances at securing their own loan. Here, we answer some of the more frequently asked questions guarantors have when attempting to apply for a loan.

Q: Are guarantors allowed to apply for loans?

A: Yes, guarantors are allowed to apply for loans. However, the approval of their loans are subjected to credit history verifications, financial capacity to repay and other requirements, just like any normal loan application

As with other standard loan applications, your credit history would have to be sound with no heavy debts for the loan to be approved.

Q: What are the responsibilities of a guarantor?

A: As a guarantor, you have the civil responsibility to repay back the loans you have guaranteed for your family or friend. The banks and other financial institutions have the legal right to hound you and harass you to repay the amount owed to them.

Keep in mind however, that a guarantor is a civil responsibility, and there are no criminal implications attached to it.

Q: In what circumstances can my responsibilities as a guarantor be waived?

A: You can be exempted from performing you guarantor duties if:

• The creditors have secured their claim from the original debtor
• The creditors has been proven negligent in maintaining the loan agreement such as not renewing loan agreements after they expire
• Defence submitted by guarantor regarding claimed impairment of collateral
• Losses secured by the creditors, thereby waiving a part of the material debt
• Guarantors are allowed to be exempted from punishment within the abstaining range of the creditors

Q : What considerations do I have to make before becoming a guarantor?

A: Apart from it being a financially risky move, you also have to consider that it may adversely affect your relationship with the debtor in the case he or she fails to service the loan. Additionally, you will carry this responsibility all your life unless the debtor puts in an application for you to be removed as a guarantor and the lending institution approves it.

Q: Can the original debtor’s actions affect me as guarantor?

A: Yes it can. The ability of the debtor to service his or her loan on time, and how regularly payment is made will be recorder and checked when you want to apply for your own loan. It will affect how your application risk is perceived.

Q : Can I be a guarantor of my own accord?

A: Yes, if you want to volunteer to guarantee a loved one’s loan to increased their chances of obtaining one, all you have to do is contact a lawyer and put in a signed declaration.

For more legal counsel regarding the laws surrounding the act of being a guarantor, we highly suggest you speak to a lawyer specializing in finance and other credit matters.