What is a 'Guarantor'

A guarantor is a person who guarantees to pay for someone else's debt if he or she should default on a loan obligation. A guarantor acts as a co-signor of sorts, in that they pledge their own assets or services if a situation arises in which the original debtor cannot perform their obligations.

BREAKING DOWN 'Guarantor'

Usually, people or businesses with poor or limited credit history can only get a loan if they have a guarantor. For example, an individual with a comparatively low credit score looking to obtain a line of credit to cover unforeseen expenses may be required by the bank to find a guarantor before the bank will issue them the line of credit.

RELATED TERMS
  1. Personal Guarantee

    An individual’s legal promise to repay charges to a business ...
  2. Rent Guarantee Insurance

    Insurance bought by a tenant that pays the monthly rent for a ...
  3. Obligation

    The responsibility to meet the terms of a contract. If an obligation ...
  4. Bank Guarantee

    A guarantee from a lending institution ensuring that the liabilities ...
  5. Financial Guarantee

    An non-cancellable indemnity bond that is backed by an insurer ...
  6. Debtor

    A company or individual who owes money. If the debt is in the ...
Related Articles
  1. Taxes

    What's a Debtor?

    A debtor​ is an individual or company that owes money.
  2. Investing

    Explaining Counterparty Risk

    Counterparty risk is the risk that the other party in an agreement will default, or fail to live up to its contractual obligation.
  3. Personal Finance

    How To Overcome Bad Credit

    Some lenders can look overlook your credit score and assess other factors that fairly determine if you are a reasonable credit risk.
  4. Personal Finance

    Getting Your Name Off A Cosigned Loan

    If you want to remove your name from someone else’s loan, there are four key ways to do it.
  5. Personal Finance

    Personal Loans: To Lend Or Not To Lend?

    Attempting to help a loved one with a cash loan can put a strain on your relationship - and your bank account.
  6. Personal Finance

    Getting Your Name Off A Cosigned Loan

    If your friend or relative has proved to be irresponsible, getting out of the cosigned loan can improve your financial security and options for borrowing.
  7. Personal Finance

    Personal Loans: Consider These Alternative Lenders

    Looking for an alternative source of financing for a personal loan? Take a look at these companies.
  8. Investing

    What's a Bank Guarantee?

    Bank guarantees are used to assure a third party of payment or performance of an obligation. The obligation can be either to pay an amount due or to perform on a contract. By granting the guarantee, ...
  9. Personal Finance

    The Basics Of Lines Of Credit

    Lines of credit are potentially useful hybrids of credit cards and normal loans. Learn how a line of credit can help (and hurt) your finances, and how to find the best one to suit your needs. ...
  10. Managing Wealth

    When Are Personal Loans a Good Idea?

    You never want to borrow money for frivolous reasons, but these five circumstances might warrant it.
RELATED FAQS
  1. Does cosigning a loan affect a credit score?

    Find out what can happen to a credit score when a cosignor must take over a debt that he or she cannot afford and what collection ... Read Answer >>
  2. Are personal loans bad for your credit score?

    Discover how taking out a personal loan can affect your credit score, and learn how a personal loan can help your overall ... Read Answer >>
Trading Center