What are the liabilities of a guarantor?
More often than not, guarantors willingly sign the contract of guarantee without fully realising the impact it may have in the future. Therefore, it is extremely important for a prospective guarantor to read and understand the contract of guarantee before signing.
Below are some points to explain the liabilities of a guarantor:
- The extent of the liability of a guarantor will be as specified in the guarantee document
- A guarantor may be held liable for the liabilities of the borrower in accordance with the terms of the guarantee document
- A guarantor can only be rendered liable under a guarantee if the borrower is in default of any payment to the financial institution and the financial institution makes a demand on the guarantor
Independent Legal Advice
It is imperative that you obtain independent legal advice before signing a contract of guarantee. This will ensure that you are aware of the true nature of the document and its legal implications, for example your rights and liabilities under the guarantee, especially if the financial institution changes the terms and conditions.
You should seek
legal advice on the legal implications of the guarantee before signing
Reprinted with permission from BankingInfo (A Consumer Education Programme)
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