BoG Warns Loan Guarantors

Dr. Ernest Addison


THE CENTRAL Bank has advised guarantors to borrowers from financial institutions to assess the repayment capabilities of such persons before initialing any contracts.

In a recent notice, the Bank of Ghana emphasised, “Do not 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 said guarantors had a legal and financial responsibility to repay the outstanding balance on any loan, if the borrower defaulted.

BoG defines a loan guarantor as an individual who gives an undertaking or promises to pay a borrower’s debt if the borrower defaults on a loan obligation i.e., if the borrower fails or is unable to repay the loan with accrued interest.

“Do not rush to guarantee for borrowers and sign off on the documents but rather obtain and study the loan agreement to ensure that you understand the terms and conditions, and you are comfortable, before committing yourself,” it added.

The central bank further warned guarantors not to only depend on a borrower’s word of mouth or merely the relationship they have with them to guarantee their loans.

“It is your duty to do due diligence. Remember, commitment has legal implications and exercise caution, if in doubt, seek independent legal and financial advice prior to accepting to guarantee a loan,” it stated.

A business desk report