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A party who will guarantee repayment or performance of a covenant.


A third party who promises to provide payment on a bond, loan, or other liability in the event of default. While many guarantees apply to debt instruments, they may also be used for day-to-day expenses. For example, a parent may be a guarantor for an adult child and promise to pay rent to a rental agency if the adult child does not do it. Banks often serve as guarantors on behalf of certain clients, but, just as often, private parties serve as guarantors and promise payment on private loans. Guarantors reduce the risk to loans and liabilities, and usually improve the credit agency ratings of bonds.


If lenders are concerned about your income, your credit history, or other risk factors when you apply for a loan, they may require a guarantor, or cosigner.

The guarantor signs the loan with you and agrees to pay your debt if you default. For example, lenders may fear that your income may not be high enough to meet your payments if you encounter any unexpected financial setbacks.

Laws governing who may serve as a guarantor vary from state to state. Some states require that your guarantor be a resident of the state where you're obtaining the loan, while others will accept guarantors from out of state as well.

References in periodicals archive ?
According to unnamed government sources cited by CNA, the finance ministry now proposes that guarantors are called to settle the principal debtor's dues when the latter is unable to do so.
It's a system of lending that's far more flexible than most modern loans which are often turned down when the borrower has poor credit or doesn't own their home," the article noted, adding that because each applicant has a buddy acting as his or her guarantor, there's less risk to Buddyloans.
The Deputy Judge stated that the common law rule applied to release the guarantor entirely from its liability under the lease.
Some of the better rates available for guarantor mortgages are listed below: | A low fixed rate: Leeds Building Society is a lender that has allowed guarantors for many years and currently has a fixed rate deal of just 2.
Under those circumstances, those where the entity's assets are being held by the guarantor, the Robins court said that bankruptcy protection will protect both the Entity debtor and its guarantors.
Not only is it difficult to verify credit history, it's also an ordeal to go after an international guarantor in the event that a tenant skips out on rent.
Guarantor Loans Online also now offer [pounds sterling]4000 loans on a 4 year term.
The borrower's failure to promptly repay the loan puts the guarantor in an awkward position.
In these uncertain financial times, this was especially important if the tenant did not have good financial status and the guarantor was financially strong.
The most common restriction is a reduction in the maximum amount you can borrow compared to the value of the property so your guarantor may have to assist you with some funds to cover a larger deposit as well.