What are the do's and don'ts of being a guarantor?

Do's and Don'ts

  • Read and understand the nature of the guarantee. A prospective guarantor must not sign a document that he has not read or sign a document which is in fact a blank form or a partially completed form. A person signing such a document would have no defence in law should he decide to challenge it in the court of law

  • You should seek professional/legal advice on the legal implications of the guarantee before signing

  • Check and ensure that the guarantee is subject to the laws of Malaysia

  • Be wary about giving a photocopy of your identity card or passport to anyone other than the financial institution or the lawyers acting on your behalf

DO NOT sign any guarantee if you:

  • Do not have a financial, business or moral interest in the transaction and are uncertain as to the nature of the transaction

  • Have doubts as to the ability or integrity of the borrower

  • Feel that you are under undue pressure or duress to do so

  • Do not understand the terms of the guarantee and do not have an independent party explaining it to you

  • Believe that you have no capacity to settle the debts of the borrower if he fails to pay

ALWAYS ensure that:

  • The maximum amount to be guaranteed is clearly stipulated and whether it is inclusive of accrued interest

  • You are aware of your liabilities in the event that variations are made to the terms and conditions of the loan

  • In a joint or joint and several guarantee, all the guarantors sign the guarantee

  • The name of the borrower is clearly stated on the guarantee document

  • You seek clarification or explanation on any of the terms of the guarantee, if in doubt. If necessary, seek legal advice before signing

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Reprinted with permission from BankingInfo (A Consumer Education Programme)

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Knowledge Base ID :   1202
Last Reviewed :   May 22, 2014
Source :   BankingInfo
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