Be careful being someone's guarantor

Ruapehu Bulletin, Volume 14, Issue 673, 11 February 1997, Page 15

Be careful being someone's guarantor

By

Pamel;

i Rogers,

Ministry of Consumer Affairs Mrs J went with her student son when he purchased a stereo. She signed his hire purchase paper belie ving she was witnessing the document. She was a mistaken, as she was to find out two months later. Mrs J recei ved a bill for nearly $900. She discovered her son had not made any of his hire purchase payments. The paper she had signed was an agreement to pay her son's debts. Mrs J was a guarantor. A guarantor is someone who agrees to repay a loan, or other debt, if the person taking the loan cannot pay. A person taking out a loan may often be asked to

name a guarantor, particularly if they are under 1 8 or there's a risk they won't repay the loan. Anyone over 18 can be a guarantor, but usually they must have a steady income before they will be acceptable. Some loan companies don't check whether the guarantor can afford to pay the debt. However, the guarantor will have to pay even if they can't afford to. The lender does not have to give the guarantor a copy of the contract unless the guarantor asks for it and pays $5. The lender must then provide the copy with 15 days. Some guarantors may be asked to sign a 'secured guarantee' in which they are asked to list some of their property as security. This means that

if the borrower cannot pay, and neither can the guarantor, then the lender can take the li sted property and sell it to recover the debt. If a guarantor has listed their house as security, and they can't repay the debt, then they should seek legal advice immediately. The lender can take action to sell the house. We know of instances where this has happened. Contract care We advise consumers to take the utmost care when signing any contract. If you have agreed to be a guatantor make sure you know what you have agreed to. Check that the contract tells you the situations in which you will have to repay the loan. Check also that the contract says how long you

must act as guarantor and the amount you are guaranteeing. If you think the guarantee you signed was unfair, you can ask the Disputes Tribunal to decide if the contract was 'harsh or oppressive'. The Tribunal or Court can order that the guarantor does not have to pay so much or does not have to pay anything. The Disputes Tribunal can also be used by the guarantor to claim back the money from the borrower. However, it's unlikely they'd get their money back from someone who couldn't pay their debt in the first place. Again we say, always check anything you sign. If you are uncertain, get good advice from a trustworthy source first.