9,075
edits
Difference between revisions of "Co-Signing or Guaranteeing a Loan"
Jump to navigation
Jump to search
m
Co-Signing or Guaranteeing a Loan (view source)
Revision as of 22:53, 16 November 2023
, 22:53, 16 November 2023→Work out problems
Drew Jackson (talk | contribs) |
Drew Jackson (talk | contribs) |
||
| Line 45: | Line 45: | ||
==Work out problems== | ==Work out problems== | ||
=== | ===Step 1. Consider whether you are liable=== | ||
In some cases you may not be responsible for a debt if you guarantee or co-sign a loan. For example, a lender (or borrower) can’t use force, fraud, duress or illegal means to get you to sign. | In some cases you may not be responsible for a debt if you guarantee or co-sign a loan. For example, a lender (or borrower) can’t use force, fraud, duress or illegal means to get you to sign. | ||
The law allows certain defences for guarantors that aren’t open to co-signers. For example, if the lender and principal debtor make changes to the guarantee that are harmful to the guarantor, the guarantor may not be liable. | The law allows certain defences for guarantors that aren’t open to co-signers. For example, if the lender and principal debtor make changes to the guarantee that are harmful to the guarantor, the guarantor may not be liable. | ||
===Step 2. Negotiate a reduced payment=== | |||
Say you’ve co-signed or guaranteed a loan, the borrower has defaulted, and the lender is asking you to pay up. What do you do if you can’t afford it? One option is to negotiate a reduced payment. The lender may agree to release you from liability if you pay a portion of the loan. | Say you’ve co-signed or guaranteed a loan, the borrower has defaulted, and the lender is asking you to pay up. What do you do if you can’t afford it? One option is to negotiate a reduced payment. The lender may agree to release you from liability if you pay a portion of the loan. | ||
===Step 3. Negotiate to limit your liability=== | |||
Consider negotiating with the lender to limit your liability for the loan. For example, the lender may agree to release you from responsibility if: | Consider negotiating with the lender to limit your liability for the loan. For example, the lender may agree to release you from responsibility if: | ||
| Line 69: | Line 63: | ||
* there are enough other co-signers or guarantors to satisfy the lender | * there are enough other co-signers or guarantors to satisfy the lender | ||
===Step 4. Make an agreement with the other borrower=== | |||
As a guarantor or co-signer, you can make a separate contract with the other borrower. In it, you can set out what happens in the event of a default. For example, you could say that the other borrower must reimburse you for any payments you make if they default. This is called “indemnifying” you. | As a guarantor or co-signer, you can make a separate contract with the other borrower. In it, you can set out what happens in the event of a default. For example, you could say that the other borrower must reimburse you for any payments you make if they default. This is called “indemnifying” you. | ||