What are your rights as a guarantor?

When taking out a loan, an individual may be asked to provide or appoint a guarantor. A guarantor is someone who agrees to take legal responsibility for a loan or agreement if said individual fails to make the necessary repayments. Guarantors may be appointed in several different contexts, including (but not limited to) rental agreements, personal loans, and finance contracts.

A guarantor’s liability will depend on the wording of the guarantee. It is, therefore, imperative that they read and understand the terms, before committing to being a guarantor. In some circumstances, the guarantee may create liabilities for administration charges, interest and costs of recovery in the event of a default, not just the principal loan. Guarantor’s may still be held liable, even if they themselves have lost their job, fallen ill, or been made bankrupt.

If a guarantor is forced to settle the borrower’s debt, they might seek to recover their loss directly from the borrower in a process known as ‘subrogation’. Securities granted by the borrower under the principal agreement must apply to the specific liability in question.

There are certain situations where a guarantee may not be enforceable. For example, if the guarantee was the product of fraud, negligent misrepresentation or undue influence, or where the primary agreement is varied with the guarantor’s knowledge.

If you are seeking legal advice in relation to being a guarantor, or you would like to discuss your options for recovering money, please call us on 01252 733770, contact us at Baker Law or send us an email at [email protected]