A credit guarantor is named in a guarantee agreement as being responsible for payment in the event that the named borrower in the agreement defaults on payments. This is more commonly referred to as a co-signer.
Significance
A credit guarantee agreement is normally supplemental to other loan documentation that outlines the co-signer's rights and obligations. The agreement is written to encourage credit be extended to the borrower, using the guarantor as financial security.
Function
The most common guarantee agreement is in relation to applications for student loans. However, guarantee agreements can be used for cars, homes or even credit cards. A credit guarantee agreement can be used in any facet where credit could be revoked or extended.
Warning
Signing a credit guarantee agreement holds the guarantor (co-signer) liable for the debt in the event of non-payment. The debt will also appear on the guarantor's credit report and file which can negatively affect the amount of debt he is shown to carry. This can hinder more credit being extended until debts are paid off.
0 comments:
Post a Comment