It can be a minefield, paved with good intentions. Before you lend a helping hand - or ask for one - it is imperative that you understand exactly what you are agreeing to by offering a legal guarantee and co-signing a loan. Even a simple car loan comes with a host of risks and implications that have the potential to affect not only your financial situation, but your relationships, too.
No one expects to default on a loan, but what if they do? What if circumstances change, and the borrower is suddenly unable to make the payments? The guarantor is responsible for the debt. What if the guarantors (often the parents) suddenly need to sell their home, which they put up as collateral? The bank can call the loan in immediately. Legal guarantees are a tricky business and are generally best entered into with full independent advice.
