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Should you be a guarantor?

A CLOSE friend asks you to become a guarantor for his loan. Because the two of you have known each other for many years, you tell him it should not be a problem. But do you sign it immediately? The general wisdom is no. Standing as a loan guarantor is not like recommending your friend for a job. If your friend fails to repay his loan, the nice loans collector will come after you. So, it pays to be cautious.

Having more than one guarantor for a loan does not necessarily mean your obligations get lighter. This is because the liabilities of a joint-guarantor may not be shared equally. In such a case, the bank may recover the debt fully or partially from any of the guarantors.

Basically, there are two types of guarantees. Under a joint guarantee, the obligation of a guarantor who has passed away will shift to the other guarantors who are still alive. A joint and several guarantee meanwhile means that the obligation of a guarantor who has passed away remain with his estate.

TO BE A GUARANTOR HE OR SHE MUST BE:

* 18 years old and above

* Not a bankrupt

* Of sound mind and having the mental capacity to understand the responsibilities and obligations of a guarantor

* Not forced, influenced or tricked into being a guarantor

AS A GUARANTOR YOU HAVE THE RIGHT TO DO THESE:

* Obtain a copy of the guarantee letter or contract and any other documents connected with the loan

* Go ask a lawyer first before signing

* Get information on any outstanding loans of the borrower, but he must give his permission

* Ask the borrower to pay off the loan to release you from your obligations in the guarantee

* Be indemnified by the borrower if you have to make any payments to the lending bank

IMPORTANT THINGS TO REMEMBER ABOUT BEING A GUARANTOR

* Read and understand what you are getting in for. Most people willingly sign on as a guarantor without understanding the impact on them.

* Check and ensure the guarantee is subject to the laws of Malaysia, getting a lawyer's advice may be a good idea.

* Be careful about people wanting to copy you IC. If they're not the bank or your lawyers, forget it.

* Do not sign a blank or partially filled document. Also do not sign anything if you're not financially, business or morally connected to it.

* Don't become a guarantor unless you can trust that someone's ability and integrity.

* Sometimes the terms of a loan changes, be sure you are updated if this happens.

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