What does it mean to be a loan guarantor?
Your friend may want you to be the guarantor of the loan they are taking out. If you are a guarantor on someone else’s loan, you promise the lender that you will repay the borrower’s loan if they do not repay. If you sign as a guarantor on a loan contract, that is legally binding, so you should only agree to sign if you can afford the risk. Before becoming the guarantor of your friend’s loan, you should consider the following areas:
1. Are you able to pay your friend’s debt if they do not pay that loan?
2. Do not sign as a guarantor unless you know who the document is for (is it really for your friend? Or are they helping another person out?), and how much money you are agreeing to pay.
3. Be very careful before agreeing to pay “all moneys” owed by the borrower because if your friend does not pay, you will have to pay everything they owe (including interest).
If you agree to be a guarantor on the loan, you have a right to receive a written copy of the loan, a copy of the guarantee, and a statement of the amount payable by borrower and payment due dates within 7 days.
Lending a helping hand to a friend in need is a nice gesture but remember that it is okay to say “no” sometimes if it means protecting your hard-earned money!
References:
Enrich. How do I know that I am financially healthy? https://enrichhk.org/how-do-i-know-i-am-financially-healthy
Enrich. My friend has asked me to sign as a ‘guarantor’ for her loan. Should I sign? https://enrichhk.org/my-friend-has-asked-me-sign-guarantor-her-loan-should-i-sign
Enrich. What are my rights when I borrow a loan? https://enrichhk.org/what-are-my-rights-when-i-borrow-loan
Enrich. What do I do if I think I have signed a bad loan contract? https://enrichhk.org/what-do-i-do-if-i-think-i-have-signed-bad-loan-contract
Enrich. What is the difference between a borrower, guarantor, reference and witness? https://enrichhk.org/what-difference-between-borrower-guarantor-reference-and-witness
