My tenant who is a foreigner called me and asked me to be his guarantor. He wants to buy a car. Although he came from a rich family, he does not want to burden his parents by asking them to buy the car by cash. He wants to finance the car using his monthly allowance. The car salesman managed to find bank loans for him but the bank required a guarantor who is a local. So he called me up and requested me to be his guarantor. He even offered some money for me to be the guarantor.
My wife is a bit worried about the request. Knowing the legal implications of becoming a guarantor we decided not to accept his request and offer. Hire purchase loans are not exactly the same as secured loans. If anything happened to my tenant and he failed to pay the monthly installment, the guarantor would have to bear the risk of paying the remaining installment amount. Although the bank can re-possessed the car, the value of the car normally does not exceed the remaining amount owing to the bank. The guarantor would normally apply for personal loans to pay the amount owing. This is the risk a person would have to take when he agreed to be the guarantor.
