Guarantors

13.3.4.L1 Updated on:13 October 2021

Why would a client need a guarantor?

Some credit providers may require a guarantor to take responsibility for the risk of the client defaulting on a credit or hire agreement. If the client defaults on the agreement, the credit provider will usually be able to take action against either the client or the guarantor, depending on their financial situation and the terms of the agreement.

What happens if a debtor defaults on paying the debt

A guarantor agrees to pay off the outstanding debt on a credit agreement if the borrower or hirer defaults. This is a very serious legal commitment.

Who is normally asked to provide a guarantor?

People under 18 are generally asked to provide a guarantor, usually a parent, because credit agreements are unlikely to be enforceable against them. In this case, the credit provider will take action against the guarantor if the client defaults on the agreement since they cannot usually take action against the person under 18. If action is taken then the judgement wouldn’t be enforceable until the creditor was 18.

What are the obligations of a guarantor?

The obligations of a guarantor will depend on the terms of the agreement they signed. The guarantor will usually be fully responsible for the debt and may be sued either separately or jointly with the person who owes the money. If the guarantor is sued alone, they may apply to the court for the person who owes the money to be sued with them. A guarantor who has paid an outstanding debt is entitled to claim the money back from the person who took out the agreement.

Clients should not enter into an agreement as guarantor unless they are fully aware of their responsibilities and prepared to pay the debt if necessary. Signing as guarantor is not just a formality.

See Liability for debt and challenging a debt for more information.