Definition
A person who agrees to repay a loan if the primary borrower defaults, providing extra assurance to the lender.
What to consider
- Understand that you’re taking on extra risk by guaranteeing a loan.
- Make sure you completely trust the primary borrower.
- Review all loan terms carefully before agreeing to guarantee.
Real world scenarios
- When renting her first apartment, Leah needed a guarantor—a relative who agreed to cover the rent if she ever failed to pay.
Related terms
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