Guarantor Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Guarantor, written in plain English, along with examples of how it is used.
What is Guarantor?
(n) Guarantor is the person assuming responsibility for the performance of an action or obligation of another person or entity, by agreeing to compensate the beneficiary in the event of such non performance contained in the guarantee agreement.
History and Meaning of Guarantor
A guarantor is a person who assumes responsibility for another person's payment or performance of an obligation. The concept of the guarantor has been present in legal systems for centuries, with evidence of guarantee agreements dating back to ancient Rome. In modern legal systems, the guarantor is typically involved in financial transactions, such as loans, where a third party is needed to guarantee repayment if the borrower defaults. While many forms of financial transactions today do not require a guarantor, they are still common in situations where the borrower does not meet certain eligibility criteria or cannot offer sufficient collateral.
Examples of Guarantor
John wants to rent an apartment but has bad credit. The landlord requires a guarantor to sign the lease, and John's father agrees to serve as the guarantor, taking responsibility for payment of rent and damages if John is unable to do so.
Susan applies for a small business loan but does not have enough collateral to secure the loan. The bank requires a personal guarantor, and Susan's sister-in-law agrees to take on this role, promising to pay back the loan if Susan defaults.
A company needs to secure a performance bond to bid on a large construction project. The surety company serving as the guarantor agrees to pay the project owner if the company fails to meet the specified requirements.
Legal Terms Similar to Guarantor
- Surety - a party that assumes liability for another's performance under an agreement or promise
- Co-signer - a person who signs a loan or credit application with another person, agreeing to pay the debt in the event the primary borrower cannot
- Indemnitor - a person who agrees to compensate another for losses or damages that may be incurred as a result of a specific action or event