Loan Bank of South Africa journal
Understand a suretyship before you sign for someone else's debt
A family member, friend or business partner may ask you to stand surety so that they can get credit. It can feel like a formality or a show of support. In reality, a surety is a promise to pay the debt yourself if the borrower does not. Readers in Braamfontein who are asked to sign can slow the conversation down and read what the document actually commits them to.
By Loan Bank of South Africa editorial · · 2 min read
What standing surety means
A surety is a third party who promises the lender that the debt will be repaid if the borrower cannot pay. Signing as a personal surety can make you responsible for the loan amount and the interest and charges that come with it, and a lender may seek to recover the debt from your own assets.
Many suretyship documents are drafted broadly. A form may be unlimited in amount, may cover future debts owed to the same lender and may not end automatically when the original loan is repaid. Standard forms often include a waiver of the benefit of excussion, which means the lender does not have to pursue the borrower first before coming to you.
Read for limits and an ending
Before signing, look for three things: a maximum amount, the specific debt the surety covers and how and when it ends. If there is no limit, ask whether the surety can be limited to the specific loan. If several people sign together, check whether each of you could be held liable for the full amount, rather than only a share.
Ask what happens when the loan is repaid and how you would receive written confirmation that the surety has been cancelled. Keep a copy of the signed document, any cancellation letter and a record of repayments. If the terms are unclear, get independent legal advice before you sign, not afterwards.
Separate the relationship from the paperwork
Saying no to a surety is not a judgment on the person who asked. It can help to ask questions about the document itself: the amount, the lender and the period. If the borrower cannot explain those, that is useful information for both of you. Consider whether you could pay the full debt from your own budget without hardship.
This article is general information about how suretyships are often structured. It is not legal advice about a particular document, and only the actual wording and a qualified adviser can tell you what a specific suretyship means.
Surety checklist
Read the document with these questions beside you.
- Is there a maximum amount, and which debt does it cover?
- Does it cover future debts to the same lender?
- Can the lender come to you before the borrower?
- How does it end, and will you get written confirmation?
- Could you pay the full amount if you had to?