When applying for a home loan with a financial institution, and your income and asset value does not cover the required loan you are applying for, the bank may ask you to get someone to stand as guarantor for your load, meaning that if you do not pay your debt, the surety becomes personally liable to do so .

There are two types of suretyship which will define how much of the debt will be guaranteed by the surety, namely a limited suretyship which has a maximum rand value and an unlimited suretyship which has no maximum rand value. If you are the person signing surety for someone else, make sure that you read the agreement carefully and that you are prepared to pay the debt if this person does not.

A word of caution: Try to avoid signing surety for anyone including family, friends, business partners and definitely not your boyfriend or girlfriend.

If you have signed surety for someone and their financial position changes for the better it is always advisable to ask the bank if they would consider cancelling the suretyship.

Tips, if you are looking at standing as guarantor for someone’s loan:

Make sure you understand the ramifications of standing surety for someone’s debt;

 Make sure you know how much of the debt you will be asked to pay (limited or unlimited);

 Limit your surety to ‘a particular debt’ and not to ‘the person’ as you may find yourself paying for that persons other debt taken out years later;

 Limit your suretyship to a specific amount.

Security is something of value to the creditor which can convert to cash in order to recoup the debt. An example of this is when you cede a policy, which has a surrender amount (the cash value on it).