If you sign a guarantee for a friend or family you become a "guarantor" of the loan. In other words, you will become responsible for the borrower's debt if they do not repay the loan.
There are guarantees for fixed amount or "all monies". All monies guarantees are for all amounts owing under the loan, now and in the future (including such things as the principal, interest, fees, costs and expenses).
If the borrower does not pay back the loan, you could end up with a bad credit record, which will make it harder for you to borrow money in the future. Further, if you provide your house as security, you could risk losing your home if you are unable to meet the obligations of the loan guarantee. A lender can also take steps to make you bankrupt if you are unable to pay back the loan, in order to access your assets to satisfy their debt.
Insisting that a guarantor obtain independent legal advice provides protection to a lender that a guarantee will be enforceable.
If you or someone you know want more information or need help or advice, please contact us on (02) 9274 8820 or email [email protected].