What to think about when being a guarantor for your partner


Partners must carefully assess the risks and benefits of guaranteeing their spouse’s loan before they rush into an agreement. A person can become the guarantor of their partner’s loan when a credit provider is reluctant to lend to them on their own. Once they sign their name as a guarantor, they can be held accountable for the entire repayments of the loan when their partner is incapable of doing so. They will not have any rights to own the property, or the items bought with the loan.

Before taking financial responsibility for the loan, there are certain factors a partner needs to take into consideration, such as the payback period of a loan. Some loans do not have a distinct time. The loan contract should state exactly how much the partner is guaranteeing, the amount of the loan and repayments, the interest rates, fees and charges and whether it is secured. If they are guaranteeing a business loan, they will need a copy of the business plan and past financial statements to familiarise themselves with its operations.

They will need to consider how the borrower intends to repay the loan and the circumstances that could prevent them. It will help to have a plan of their repayment options in the likelihood their partner cannot pay the loan.

Partners should be aware of the exact amount they are guaranteeing. A fixed amount of money or the total amount owing can make a huge difference to the decision. They may have to sell assets, such as a house or car, to fund the loan. When a partner is sure they want to continue with the guarantee, it is worth enquiring about reducing the amount they are guaranteeing. There is a possibility that the guarantee could damage the relationship between the borrower and guarantor when something goes wrong. The partner needs to factor in whether it is worth

that risk or better to decline now. A partner should never pressure or force their spouse into signing an agreement if they are not interested in guaranteeing their loan. If this is the case, consult with a financial counsellor for help.


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