DECO informs…“What are the risks of becoming a guarantor?

In this new column, Portuguese consumer watchdog DECO will be informing readers of various interesting issues and laws affecting consumer decisions.

“What are the risks of becoming a guarantor?

DECO is receiving an increasing amount of calls for help concerning family debts related to loan agreements with a guarantor clause.

During times of crisis, you can never be too careful when accepting the role of guarantor of a loan, even for a family member.

Anyone can become a guarantor, but usually family members are chosen. Those who sign a guarantee contract give up their wealth and assets as a guarantee in case the debtor fails to comply with the loan agreement.

On many occasions, the guarantee contract includes a clause which, if accepted, allows the creditor to seize the assets of the guarantor before the entirety of the debtor’s goods are seized.

To avoid these situations, attempt to annul this clause. If the institution accepts its annulment, it will only be able to seize the wealth of the guarantor when the assets of the debtor are not enough to pay off the debt.
Another common question surrounds the issue of whether or not a guarantor can cancel his role in the contract.

Normally, the answer is negative. The contract can only be changed if an agreement is reached between all parties and that possibility is extremely unlikely because the creditor will rarely want to give up a guarantee.

All in all, the decision to become a guarantor should not be taken lightly. It is a decision that requires thought because the guarantor can always be called to take on the total amount of the debt.