What Are the Rights and Liabilities of a Guarantor under a Hire-Purchase Agreement
Hire-purchase agreements are a popular financing option for many people looking to buy durable goods, such as vehicles and appliances. These agreements involve a lender or financing company purchasing the item on behalf of the buyer and then allowing the buyer to make payments towards ownership over time. A guarantor is someone who agrees to pay the debt if the buyer defaults on the payments. In this article, we will explore the rights and liabilities of a guarantor under a hire-purchase agreement.
Rights of a Guarantor
1. Protection from harassment: The guarantor has the right to be free from harassment or abuse by the lender or financing company, even if the borrower defaults on the payments.
2. Access to information: The guarantor has the right to access all relevant information related to the hire-purchase agreement, including the terms and conditions, payment schedule, and any other related issues.
3. Notification of default: The guarantor has the right to be notified in writing when the borrower defaults on the payments. This notification should include the amount owed and any penalties or fees that may apply.
4. Right to pay: The guarantor has the right to pay the debt on behalf of the borrower to avoid legal action by the lender or financing company.
Liabilities of a Guarantor
1. Repayment of debt: The guarantor is liable to repay the debt if the borrower is unable to make the payments. This means that the guarantor is responsible for the full amount of the debt, including any interest and fees.
2. Legal action: If the guarantor fails to make the payments, the lender or financing company may take legal action to recover the debt. This may include seizing the item purchased or taking legal action against the guarantor.
3. Damage to credit score: If the guarantor fails to pay the debt, it may negatively impact their credit score. This can cause difficulties in obtaining credit in the future.
4. Loss of collateral: If the item purchased is repossessed due to non-payment, the guarantor may lose any collateral they put up to secure the loan.
Conclusion
A guarantor plays an important role in a hire-purchase agreement by providing assurance to the lender or financing company that the debt will be paid. However, being a guarantor also comes with certain rights and liabilities. It is important to carefully consider the risks and benefits before agreeing to become a guarantor for someone else`s hire-purchase agreement. If you are considering becoming a guarantor, it is advisable to seek legal advice to fully understand your rights and responsibilities.