Be careful whom you guarantee loans for – BoG cautions loan guarantors

Bank of Ghana Issues Cautionary Advice on Loan Guarantees

The Bank of Ghana has issued a cautionary advisory to consumers, urging them to exercise caution when considering guaranteeing loans for others. The central bank emphasized the potential financial implications for guarantors if the borrower defaults on their repayment obligation.

According to the notice released by the regulator of the banking industry, guarantors may be compelled to repay the outstanding loan balance along with accrued interest if the primary borrower fails to fulfill their repayment commitment. The advisory serves as a reminder to individuals to thoroughly assess the repayment capabilities of borrowers before committing to guarantee any credit facility or loan.

The Bank of Ghana emphasized the importance of not hastily agreeing to guarantee loans and recommended that consumers obtain and carefully study the loan agreement. Understanding the terms and conditions of the loan agreement is crucial to ensure that guarantors are comfortable with the commitment they are undertaking.

Consumers were further warned against solely relying on verbal assurances from borrowers or personal relationships when agreeing to guarantee loans. The central bank highlighted the legal implications of being a guarantor and stressed the responsibility of guarantors to conduct due diligence.

The advisory concluded with the Bank of Ghana advising consumers to seek independent legal and financial advice if they have any doubts before agreeing to guarantee a loan. This additional step is encouraged to provide individuals with a clearer understanding of the legal and financial obligations associated with becoming a loan guarantor.