The Bank of Ghana has cautioned the general public against being guarantors for just anyone who needs one.
The Central Bank said the risks involved in guaranteeing loans have not been emphasized enough, even though many have fallen victim a lot of times.
If the borrower of the loan does not repay, the guarantor is held liable.
For this reason, the Bank is advising the general public to ensure that they can trust the capability of the borrower to pay the loan when it is due before agreeing to a guarantee.
“Assess the repayment capabilities of the borrower before guaranteeing any credit facility or loan. Don’t 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,” the Bank of Ghana said in a notice.
“Do not rush to guarantee for borrowers and sign off on the documents. Obtain and study the loan agreement to ensure that you understand the terms and conditions, and you are comfortable, before committing yourself.
“Do not only depend on a borrower’s word of mouth or merely the relationship you have with them to guarantee their loan. You must do due diligence. Remember, the commitment has legal implications,” it further noted.
The BoG, therefore, advised guarantors to “seek independent legal and financial advice before accepting to guarantee a loan.”