4 Hidden Roles A Guarantor Plays – What Is A Guarantor?

Written By Assma Riaz

Have you ever heard of someone being a guarantor? If not, then take some time to read this article.

What will I learn?

If you have some interest, then you should gain a deep understanding of what it takes to be a guarantor.

Here we are going to highlight all the aspects of the term guarantor.

What is a Guarantor – A Detailed Insight

A guarantor is an individual who guarantees to pay the debt of someone else. He takes the legal responsibility if the borrower itself fails to pay the loan.

Guarantor deposits their possession or assets as security against the loans. Due to some reasons, individuals sometimes become their own guarantors.

In such cases where a person acts as his guarantor. The person itself would pledge his belongings as a security against the loan.

The term “surety” is often used as an alternative to the word “Guarantor”.

This article highlights everything related to this role.

1. Who Can Be A Guarantor:

If someone wants to borrow money and is struggling to get approved by lenders. Then you can help them by giving their guarantee.

So anyone can be a guarantor. It can be parents, siblings, relatives, or friends.

But you should agree to give a guarantee for someone you have trust in. Also, keep in mind that you must have the ability to cover his or her repayments.

To be a guarantor, you need to have a good credit history. Your finances must be very stable.

Who Can Be A Guarantor
Who Can Be A Guarantor

Suppose you want to ask someone to be your guarantor. Then make sure that they are aware of the possible financial risks.

2. When Someone Needs You To Be A Guarantor:

If someone ever approaches you and asks you to be their guarantor. Then it can be due to the following reasons:

– They have a low source of income

– Their credit score is low

– They are a borrower because they have no credit history. (Either they are new to the country or a young person)

– Their job is new, and they have no previous savings.

When Someone Needs You To Be A Guarantor
When Someone Needs You To Be A Guarantor

The borrower might need someone’s guarantee because he wants to rent a property or need a loan. Or might be due to car finance or a mortgage.

There can be any reason behind this. But you must be very close to the person so you can discuss finances at ease.

Ask yourself these five questions before you agree to be a guarantor for someone:

1. Does the borrower have a bad credit history? If yes, then are they able to manage the repayments?

2. Is the borrower a reliable and responsible person?

3. Is there a need for a loan? Or they can manage to save for it instead?

4. Do you have the capacity to pay for the loan if the borrower defaults?

5. Is there any effect on your relationship by covering their repayments?

If you are going to be a guarantor for a rental property, it requires you to affirm for the tenant.

Suppose the tenant fails to complete the tenancy agreement. Then as a guarantor, you would be responsible for paying out for the damage to property or overdue rent.

See also: What Is A Litigation Lawyer – Why Do You Need One?

3. When You Will Need A Guarantor:

In some situations, you might need someone to be your guarantor.

For instance, you have to buy an apartment. But the property manager sees a flaw in your rental application. There can be various reasons for rejection:

– Your credit score is not good.

– Your credit report contains a bankruptcy.

– Your rental history has a mark of eviction.

– You don’t have any credit.

– You have an undependable employment history.

– The proof of income you have doesn’t meet the standard.

When You Will Need A Guarantor
When You Will Need A Guarantors

Any negative point in finances or reliability is a hurdle for being an ideal candidate. It’s a significant reason why you need someone’s guarantee.

Yet, you will need someone for this purpose only when the landlord asks you to get approved.

In the other case, you can claim the sole responsibility to pay the rent.

4. What Are The Rights And Responsibilities Of Guarantors:

The guarantor cannot claim the property which the borrower is renting or purchasing.

It can only happen when there are some specific clauses about this in the agreement.

The concept of “surety” makes the guarantor responsible for paying the borrower’s debts.

After this guarantor agreement happens, it remains active until the end of repayment.

To play this role, you should know the concept of “joint liability”. It gets implemented in such scenarios where more than one party enters the agreement.

In joint liability, the guarantor handles the debts of all these parties.

Suppose the payments are on time. Then the guarantor agreement doesn’t show on the credit report.

It only shows up on the credit history of the guarantor in case of missed payments.

Rights And Responsibilities Of Guarantors
Rights And Responsibilities Of Guarantors

What Role Does A Guarantor Play?

Another term used for a guarantor is a cosigner. The age of a guarantor should be over 18 years.

He should be the resident of the country where the agreement takes place.

Guarantors own ideal income histories. They have enough income that they can cover the loans when the borrower defaults.

In case the borrower defaults, the lender has the right to seize the guarantor’s possessions.

Then there are some cases where the borrower pays the payments after the time. Then the guarantor has to pay for extra interests and penalties.

This role can take the following forms:

1. Guarantors As Certifiers:

Guarantors not only pledge their possessions as security against loans. They also assist people in getting jobs. Even in making their documents like passports secure.

In such scenarios, they have to clarify that they know the person who is applying. Guarantors verify their identities by confirming the IDs.

So they can also act as certifiers when someone seeks help from them to be one.

2. Limited And Non-Limited Guarantors:

A guarantor can be either limited or unlimited. It depends on their timetables and financial involvement they have in the agreement.

The unlimited ones are responsible for the entire amount of the loan . They are liable for the entire duration of the contract.

The limited guarantor differs from that. A limited guarantor has to guarantee a loan for a specific time.

Limited And Non-Limited Guarantors
Limited And Non-Limited Guarantors

After the time is over. The borrower is alone to be responsible for the payments that are still left.

If the borrower defaults, he has to face the consequences alone.

In some cases, the limited guarantor has to back only a specific percentage of the loan. This percentage is a penal sum.

3. Other Contexts For Guarantors:

Borrowers not only need guarantors when they have to borrow money.

Sometimes landlords ask first-time property renters to provide them, lease guarantors.

The most common example of this is a college student. His parents’ can give a guarantee for him.

Suppose he fails to pay his rent on time. Or in case he breaks the lease agreement before time. Then his parents would be responsible for paying.

4. Guarantors Vs Cosigners:

A cosigner is quite different from a guarantor. A cosigner has its name appeared on the titles and he co-owns the possessions.

The need for a cosigner only occurs when a borrower’s income to qualify is less. It means that the borrower has less income than the amount specified by the lender.

Guarantors Vs Cosigners
Guarantor Vs Cosigners

This scenario is different from being a guarantor. A guarantor steps when the borrower has enough income. But his credit history makes him unreliable.

Guarantors cannot claim the asset which borrower purchases. But, cosigners have half of the ownership of the asset.


So a guarantor is a person who guarantees to pay the debt of the borrower. In case the borrower fails to meet the loan obligation.

In the end, you can use two ways to get a guarantor. One way is the traditional way, i.e. your parents.

In the traditional way, you can also ask your friends or family to give a guarantee to you. But before starting the process, you must get their approval.

The other option you can go for to secure a guarantor is by paying for it. There are private equity and insurance firms which would act as your guarantor.

Please do comment and give your feedback regarding this article.

Last Updated on 2 years by Assma Riaz

Assma Riaz

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