My friend has asked me to sign as a ‘guarantor’ for her loan. Should I sign?

It’s understandable that you might want to help your friend, especially if she needs the money urgently or has helped you a lot in the past. However, it is okay to say ‘no’ to friends sometimes if it means protecting your hard-earned money. 

We do not advise you to sign a loan for your friend as a guarantor - this means that you are agreeing to repay the loan amount if your friend is unable to pay and defaults on the loan. Only take this risk if you can afford it.

These are some points to consider before signing as a guarantor:

• Are you able to pay someone else’s debt if that person defaults (i.e. does not pay) on that loan?

• Do not sign as a guarantor unless you know who the document is for and how much money you are agreeing to pay.

• Exercise extreme caution before agreeing to pay “all moneys” owed by the borrower because if they default, you will have to pay everything the borrower owes (including interest).

Make sure you also understand the obligations of agreeing to be a ‘witness’ or a ‘referee’, even if you’re not a guarantor. Ask what this entails. Some unethical lending agencies will try to hold you accountable as a guarantor even if you have only agreed to be a witness/referee. 

Attend our Money and Family workshop to learn about how to have difficult conversations with family and friends, and how to say ‘no’ when needed.