Guarantors and co-borrowers

If someone asks you to be a guarantor or co-borrower for a loan, you need to think very carefully before saying yes. You could lose a lot if the other person cannot repay the loan and end up with a bad credit record yourself.

If a lender thinks a borrower may not be able to repay a loan, they will ask for a guarantee. A guarantor is someone who signs a contract, called a guarantee with a lender (sometimes called a credit provider). They are known as the guarantor of the loan. 

Generally, the guarantee covers the whole loan, but it can be limited to only part of the loan. 

Under the contract, the guarantor promises to repay the loan (or part of the loan) if the borrower (debtor) is unable to pay. 

A co-borrower is a borrower. A co-borrower signs a loan with someone else who is also a borrower. The co-borrower is legally responsible for repaying the whole debt if the other borrower cannot make the repayments.

Before agreeing to be a co-borrower, you should think about what you will get out of the arrangement given that you will be responsible for repaying the loan and could lose the full amount if the other borrower can’t pay.

This webpage has information on the rights of a guarantor, the need for financial or legal advice before becoming a guarantor and what happens if the borrower doesn’t repay the loan.

What rights does the guarantor have?

The guarantor does not have any rights to own the property bought with the loan.

Should I get financial and/or legal advice before becoming a guarantor?

You should get both independent legal and financial advice before signing a guarantee.

If you’re a guarantor for a friend or family member who can’t pay back the loan, it could damage your relationship. If you are under pressure to be a guarantor, it may be financial abuse.

If you have already signed a guarantee, you should get legal and financial advice now if you did not get the advice before signing so that you fully understand the consequences of being a guarantor and your future options.

What happens if the borrower doesn't repay the loan?

If the borrower defaults on the loan, the guarantor is responsible for the amount of the loan in the guarantee.

The lender can take possession of, or sell, any of the assets of the guarantor that have been listed as security to repay the debt, for example, their house.

Be aware that the borrower may not let you know they have stopped paying the loan.

More information

MoneySmart on going guarantor for a loan


Reviewed: 1 November 2023


The information displayed on this page is provided for information purposes only and does not constitute legal advice. If you have a legal problem, you should see a lawyer. Legal Aid Western Australia aims to provide information that is accurate, however does not accept responsibility for any errors or omissions in the information provided on this page or incorporated into it by reference.