BE EXTREMELY CAREFUL WITH GUARANTEES
You need to know your rights and legal obligations if you are a guarantor of a loan or some other form of debt.
Often, people enter into guarantees thinking that they will never called upon to pay the debt. However, things often go wrong.
In those circumstances, the person who lent the money in the first place will come looking for the guarantor.
The Courts will grant relief in certain cases.
If you are a guarantor, you need to know your legal rights.
A guarantee is a promise by a person (the guarantor) to settle a debt or fulfill the promise of someone else. A guarantee MUST be in writing.
See our specialist topic entitled Contracts Enforcement Act 1956
The person to whom the promise is made is called the creditor or lender and the person on whose behalf the promise is made is called the principal debtor or borrower.
Guarantees often state that the obligation of the guarantor is equivalent to the borrower's obligations. In such a case the lender may call on the guarantor to pay the debt in full . . .
· without requiring payment from the borrower,
· without exhausting all of their remedies against the borrower
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