The Bank of Ghana (BoG) has cautioned loan guarantors to assess the repayment capabilities of the borrower before signing any credit or loan facility.
The Central Bank said, “Do not forget that as a guarantor, you will be required to pay back any outstanding loan balance, if the borrower is unable to meet the loan obligation.”
In a notice, the regulator as part of its financial literacy programme, said guarantors had a legal and financial responsibility to repay the outstanding balance on the loan, if the borrower failed to do so.
A loan guarantor is an individual who gives an undertaking or promises to pay a borrower’s debt if the borrower defaults on a loan obligation i.e., if the borrower fails or is unable to repay the loan with accrued interest.
“Do not rush to guarantee for borrowers and sign off on the documents but rather obtain and study the loan agreement to ensure that you understand the terms and conditions, and you are comfortable, before committing yourself,” it added.
The Bank warned guarantors not to only depend on a borrower’s word of mouth or merely the relationship you have with them to guarantee their loan.
“It is your duty to do due diligence. Remember, commitment has legal implications and exercise caution, if in doubt, seek independent legal and financial advice prior to accepting to guarantee a loan,” it said.