what is a guarantor 
a guarantor is a financial term describing an individual who promises to pay a borrower s debt if the borrower defaults on their loan obligation guarantors pledge their own assets as collateral against the loans on rare occasions individuals act as their own guarantors by pledging their own assets against the loan the term guarantor is often interchanged with the term surety understanding a guarantora guarantor is typically over the age of 18 and resides in the country where the payment agreement occurs guarantors generally exhibit exemplary credit histories and sufficient income to cover the loan payments if and when the borrower defaults at which time the guarantor s assets may be seized by the lender and if the borrower chronically makes payments late the guarantor may be on the hook for additional interest owed or penalty costs types of guarantorsthere are many different scenarios in which a guarantor would need to be used this ranges from assisting people with poor credit histories to simply assisting those without a high enough income guarantors also don t necessarily need to be liable for the entire monetary obligation in the guarantee below are different situations that would require a guarantor as well as the type of guarantor in a specific guarantee in addition to pledging their assets as collateral against loans guarantors may also help individuals land jobs and secure passport documents in these situations guarantors certify that they personally know the applicants and corroborate their identities by confirming photo ids as defined under the terms of the loan agreement a guarantor can either be limited or unlimited concerning timetables and levels of financial involvement case in point a limited guarantor may be asked to guarantee a loan only up to a certain time after which the borrower alone assumes responsibility for the remaining payments and alone suffers the consequences of defaulting a limited guarantor may also only be responsible for backing a certain percentage of the loan referred to as a penal sum this differs from unlimited guarantors who are liable for the entire amount of the loan throughout the entire duration of the contract guarantors aren t solely used by borrowers with poor credit histories pointedly landlords frequently require first time property renters to provide lease guarantors this commonly occurs with college students whose parents assume the role of the guarantor in case the tenant is unable to make the rent or prematurely breaks the lease agreement guarantors vs co signersa guarantor differs from a co signer who co owns the asset and whose name appears on titles co signer arrangements typically occur when the borrower s qualifying income is less than the figure stipulated in the lender s requirement this differs from guarantors who step in only when borrowers have sufficient income but are thwarted by lousy credit histories co signers share ownership of an asset while guarantors have no claim to the asset purchased by the borrower however in the event the borrower has a claim against a third party that has caused the default the guarantor has the right to invoke a process called subrogation step into the shoes of the borrower to recover damages for example in a rental agreement a co signer would be responsible for the rent from day one whereas a guarantor would only be responsible for the rent if the renter fails to make a payment this also applies to any loan guarantors are only notified when the borrower defaults not for any payment before that in the event of a default the guarantor s credit history may be adversely affected which may limit their chances of securing loans in the future in essence a co signer takes on more financial responsibility than a guarantor does as a co signer is equally responsible from the onset of the agreement whereas a guarantor is only responsible once the primary party to the contract fails to meet their obligation advantages and disadvantages of guarantorsin an agreement with a guarantor the advantages usually lie with the primary party in the contract whereas the disadvantages usually lie with the guarantor having a guarantor means that the loan or agreement has a higher chance of being approved and much more quickly most likely it can allow for borrowing more and receiving a better interest rate though loans with guarantors tend to have higher interest rates in a rental agreement one way to avoid needing a guarantor is by paying a few months of rent upfront if you are in a position to do so the disadvantages lie with the guarantor if the person you are guaranteeing fails to pay their obligations then you are on the hook for the amount if you are not in the financial situation to make the payments then you are still liable for the amount and your credit score will be negatively impacted and legal action may be taken against you also if you guarantee a loan then your ability to borrow additional money for something else is limited because you are tied to an existing obligation helps a borrower obtain a loan or a rental much easier allows for the ability to borrow a higher amount can help the borrower improve their credit history the guarantor may be liable for the outstanding obligation the guarantor s credit score could be negatively impacted the ability to obtain another loan for a separate use is limited 