Guarantor
Candlefocus EditorWhen a loan is made, the guarantor typically signs a separate contract stating that they are guaranteeing the loan for the borrower. This means that the guarantor promises to pay the full amount of the debt should the borrower fail to pay the loan in full. The guarantor's responsibility arises out of their obligation to the lender, which is separate and distinct from any obligations the borrower might have
Many lenders require that the guarantor meet certain criteria to be eligible to guarantee a loan, such as having a good credit score and financial capacities. The lender will also conduct a background check on the guarantor to make sure they are suitable. Depending on the lenders' application process, the guarantor may be required to provide additional documents, such as proof of income and assets, to prove their ability to repay the loan in full if needed.
In the event that the borrower defaults on the loan, the guarantor must fulfill the obligation stated in the contract and make the payment. Depending on the circumstances, this could be with or without notice. If the guarantor fails to make payment, legal action may be brought against them by the lender. It is important to note that it is possible for the borrower to force the guarantor to make the payment in court, even if the guarantor does not want to make the payment.
In some cases, a guarantor may also serve as a guarantor for the verification of identity, rather than guaranteeing a loan. For example, an employer may require the person applying for a job to provide a guarantor who can confirm their identity, or in the case of a passport, someone may need to serve as a guarantor to confirm to the government that the individual is who they say they are.
In summary, a guarantor is someone who agrees to guarantee that a borrower will repay a loan, as well as verify an individual's identity. The lender will hold the guarantor liable if the borrower fails to meet their loan conditions, and may pursue legal action if the guarantor does not fulfill their obligation. It is the guarantor’s responsibility to understand the terms and conditions of their guarantee, and the implications of guaranteeing a loan.