GUARANTORS BEWARE
Sureties and Guarantees
When it comes to loans, you’ll soon come across friends, colleagues and sometimes even strangers who will ask for your assistance for you to act as a co-maker or guarantor. Maybe it’s for a small business they are setting up, or just to tide them over a passing domestic shortfall. It would do you well to understand what you are signing up for when you do.
It’s hard to say no in such instances because the implied premise is instead of borrowing from you, a friend is just asking you to vouch for his or her credit to the lender, which is not such a big deal. But you may just discover that you signed up for more than you bargained for when the creditor decides to collect from you directly.
How does this come about? This happens when you are asked to act as a guarantor or surety for a loan. This is covered by one provision in the New Civil Code:
“ARTICLE 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do. so.
If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In such case the contract is called a suretyship. (1822a)”
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