Examine the financial situation of the borrower befor you accept responsibility for his or her debt

You are accepting as large an obligation as the person taking out the loan. For this reason you have the right to understand the purpose of the loan and see proof of the borrower’s ability to pay by allowing you to examine his or her financial situation with regard to loan institutions and by reviewing a tax return. Do this no matter how well you know the borrower. If possible collect similar information about the other guarantors when appropriate.

Do not guarantee more than you can afford

Examine your own financial situation, bearing in mind that may have to pay the entire loan that you guarantee. Get a copy of the loan’s payment schedule and keep it in mind as you engage in your own financial planning.

Pay attention to the repayment of the debt

Collect information from the bank as to how well the borrower is keeping up with the repayment of the debt, regardless of whether you have received notice of non-performance. Loan institutions are required to release such information to guarantors upon the presentation of identification. Make sure the borrower pays and let the other guarantors know if the debt falls into arrears.

Don't let overdue debt accrue

Most bonds fall due in their entirety in cases of non-performance. This means a significant increase in the amount upon which penalty charges accrue. Few loan institutions wait longer than three months to commence legal collection. Once the matter comes to this stage, one can expect that the debt has increased by 10-20%. It is best to pay individual overdue payment or make other arrangements as quickly as possible to avoid the entire loan falling due.

Remember, you might have to pay the debt.