Before signing off for someone’s loan…

Tuesday April 20 2021

A customer in a banking hall. In case the person you guarantee for a loan defaults, you will be liable. PHOTO/file

By Dorothy Nakaweesi

Some people are compelled to help those around them. Sometimes helping can involve food, shelter, medical care and other times sharing the little you have.

In some circumstances, you may not be required to reach your pockets but recommend or guarantee someone to access money either in a bank or through money lenders.

But when it comes to guaranteeing someone to access money, be cautious.

For starters, who is a guarantor?

Ideally, a guarantor is a person who pledges that a debt will be paid.

This means they agree to repay the total amount owed if the borrower or renter can not pay what they owe. By guaranteeing the agreement, you become responsible for any arrears that occur.


So often those who are guaranteed to access loans or money are those we trust. It could be your spouse, sibling or friend among others.

More often, those guaranteed may take the guarantors for granted and default with the mindset that ‘so and so’ will bail them out.

This was the case for Allan Ssempa who guaranteed his wife for a loan of Shs40 million after she convinced him that paying back was a sure deal.

“A few months into this loan, we had misunderstandings and we separated. At the back of my mind I knew that since she was salaried, this would help her service the loan. But I was unfortunate,” Ssempa shares.

Four years down the road, Ssempa is struggling to payback a loan because his ex-wife eloped with another partner in the USA.

Just like Ssempa, many people are suffering silently in repaying back loans for which they guaranteed.

So, here are some of the issues you must consider before putting ink on that loan document to guarantee those around you.

Mr Elijah Omagor, the chief executive office Konnect Initiatives Ltd, a unique and specialised member based savings and investment Mutual Fund and a business coach says: “Never guarantee someone else’s loan.”

However, he says if you must; that person you are guaranteeing should be someone you know personally and of impeccable integrity.”

“That person should have a known source of income which is designated to pay off the loan,” he adds.

If you have to guarantee better still, Omagor says it would be good if you have some authority or control to enforce compliance with the terms of the loan.

“If you are the employer or if you owe the person an obligation which if the worst comes to the worst, you can convert into clearing the loan.”


Experts say at any one time, it should be at the back of your mind that in case the person you are guaranteeing defaults, you will be liable.

“This means that your assets and savings are at risk. In case the borrower defaults, they will be used to recover the loan,” Omagor warns.

For any financial institution to authorise a loan, the guarantor must meet the same criteria like those they are standing in for.

Having a stable source of income is one of the considerations that needs to be checked.

“Your monthly pay cheque must demonstrate the ability to pay in the event that the guarantee has failed to pay,” Omagor shares.

A guarantor, also has rights to a copy of the guarantee letter, as well as any other important documents related to the transaction of the loan.

It would be advisable to involve legal personnel to guide you before endorsing your signature to guarantee someone for a loan.

Experts also advise that before you guarantee someone, do your background check to know their credit history.