Australian Mortgage and Loan Information

After watching an episode of CSI last night about a young woman’s attraction and loyalty to a “Bad Boy”, I started to wonder what happens to women who sign loan guarantees for “Bad Boy’s”.

You get the picture: He wants to impress with a flash house, but doesn’t have a steady job, so the love-struck girlfriend signs a guarantee, as he confesses his undying love and devotion while promising faithfully to keep the loan in order until it is paid. However, six months later no payments have been made, he’s gone and the Sherriff delivers a demand for payment to the guarantor! What should an ex girlfriend do?

In the good old USA I gather she can hand back the keys and let the bank worry about it, but how does this effect her credit record?

I am interested if anyone has a comment? In CSI she has him killed for the life insurance, so justice is served. I think!

In Australia, the guarantor has no rights to the property or asset they are guaranteeing payment for. You will need a private agreement with the person or entity you are agreeing to go guarantor for if you want rights to an asset. The minute you sign a guarantee you become legally bound to assume responsibility for the debt, generally both jointly with and as alternate too the loan applicant. You will not be able back out, change your mind or argue that you didn’t understand what you were signing.

For lender’s, a guarantee can be a very powerful and useful document. If the borrower does not pay, you as the guarantor will be compelled too. One missed payment by the borrower could be enough to make you responsible. It won’t matter why the borrower stopped paying, if they cease or are short on their required repayments your guarantee means you said you would pay in their place.

If you fail to make payments after they have been demanded, the lender may take legal action against you to recover their money. As a result of successful legal action a lender may take your house, land, shares, savings or any other things of value to satisfy their debt.

My advice is you should never consider taking on a guarantee, but if you must, make sure it has a limit and get an agreement in place as regards the ownership of the asset. A reputable mortgage broker will have options other than a guarantee if you need to help a family member get into their first home or help a friend in need. Get legal advice if a guarantee becomes your only option.