Guarantor advice
Know what you’re signing before you sign
Guaranteeing a loan is a serious commitment. If the borrower can’t pay, the lender can come to you, and your home may be at risk. Most lenders won’t accept a guarantee until you’ve had independent legal advice and they have a certificate to prove it.
Independent means we act only for you, not the lender or the borrower. We review the loan and guarantee documents, explain how much you could have to pay and for how long, and answer your questions in a meeting without the borrower present. We advise on home loans, commercial loans, SMSF loans and family guarantees.
How it works
Advice and your certificate in three steps
- Book and send your documentsBook a time and send us the loan contract, guarantee and any mortgage documents your lender has given you.
- Meet with usWe meet with you, without the borrower, in person at one of our offices or at your home. We take you through the documents and answer your questions.
- Get your certificateIf you decide to go ahead, we sign the legal advice certificate your lender requires so the loan can proceed.
What’s included
What our guarantor advice covers
- Review of the loan contract, guarantee, indemnity and any mortgage over your property
- A clear explanation of the key clauses and how they work together
- Your maximum liability, including interest and costs, and which of your assets are at risk
- How long the guarantee lasts and how you can be released
- Your rights under the Banking Code of Practice and the National Credit Code, where they apply
- A meeting without the borrower present, so you can speak freely
- The legal advice certificate your lender requires, once you decide to proceed
- A fixed price, agreed before we start
Key clauses
Key clauses in a guarantee
Guarantee documents are written by the lender, for the lender. These are some of the clauses we explain to guarantors.
Guarantee and indemnity
The indemnity part can make you liable even if the lender can’t recover from the borrower for a technical reason.
All monies
You may be liable for all the borrower’s debts to that lender, now and in the future, up to the limit in your guarantee. It may not be just the loan in front of you.
Continuing guarantee
The guarantee stays in force until the debt is repaid or the lender releases you. For a home loan, that could be up to 30 years.
Joint and several liability
If there is more than one guarantor, the lender can claim the full amount from any one of you.
Principal debtor clause
The contract may let the lender claim from you without first suing the borrower, subject to the Banking Code limits below.
Variations and increases
The guarantee may cover future changes to the loan. A bank that follows the Banking Code must get your written acceptance before it increases your guarantee limit.
When two or more of these clauses appear together, your exposure can be much bigger than you expect. That’s why a careful read by a lawyer matters.
Your protections
How the Banking Code of Practice protects guarantors
Most Australian banks follow the Banking Code of Practice, which gives extra protections when you guarantee a loan to an individual or a small business. If your lender is a bank that follows the Code, it must:
Give you information first
Including a copy of the proposed loan contract and, in many cases, the borrower’s recent financial information held by the bank.
Give you time to think
The bank can’t accept your guarantee until the third day after it gives you that information, unless you or your lawyer confirm you’ve had independent legal advice.
Speak with you without the borrower
The bank must take reasonable steps to meet with you while the borrower isn’t present, and if the bank attends your signing, the borrower must not be there.
Limit your liability
Your guarantee must be limited to a set amount, or to the value of a specified property.
Keep you informed
The bank must send you a copy of any formal demand or default notice it sends the borrower.
Go after the borrower’s security first
The bank must enforce the borrower’s own mortgage or other security before it enforces a mortgage over your home given under the guarantee.
Let you withdraw
You can withdraw in writing before the loan is first drawn down, or later if the signed loan is materially different from the one you were shown.
Some of these protections don’t apply, or apply differently, if you are a company director guaranteeing your company’s loan, or a trustee or partnership guarantor. Non-bank lenders may not follow the Code at all.
Consumer credit
What about the National Credit Code?
If the loan is consumer credit, such as a home loan to an individual, the National Consumer Credit Protection Act 2009 also requires the lender to give you a copy of the proposed contract and an information statement before you sign. Business loans and SMSF loans are usually not covered by the National Credit Code, so you may have fewer protections.
A legal advice certificate is usually your lender’s own requirement rather than a Banking Code rule. Either way, we provide one after your advice if you decide to go ahead.
The risks
The risks of being a guarantor
You may have to pay
You could be liable for the borrower’s debt up to your guarantee limit, plus interest and costs. Your property may be at risk.
It can last a long time
Your obligation usually continues until the loan is repaid or the lender releases you.
It can affect your own borrowing
Future lenders may treat the guarantee as a possible debt, which can reduce how much you can borrow.
Pressure is common
Guarantors are often asked by a child, partner or business partner, which makes it hard to say no or ask hard questions.
Courts help only in limited cases
A court can set aside some unfair guarantees, but these cases turn on their facts and are no substitute for advice before you sign.
Get financial advice too
We give legal advice, not financial advice. To work out whether you can afford the risk, also speak with a licensed financial adviser or your accountant.
Before you sign
Questions to ask before you sign a guarantee
- What is the most I could have to pay, including interest and costs?
- Which of my assets are at risk? Is my home offered as security?
- Does the guarantee cover only this loan, or all monies the borrower owes?
- How and when can I be released?
- Can I see the loan contract and the borrower’s financial information?
- Could I afford to pay if I had to, without selling my home?
ASIC’s Moneysmart website has more tips in its guide to going guarantor on a loan.
Why Hindsight
Why guarantors choose us
We know the lenders’ documents
Our partners have drafted loan and guarantee documents for major Australian banks and lenders, so we know exactly where the risks sit.
Fixed price
Our guarantor advice is offered at a fixed price, agreed upfront, with no hidden fees.
At our office or your home
Meet us at one of our offices, or one of our lawyers can come to you.
Partner-supervised
Every matter is supervised by one of our Founding Partners.
Our partners
Advice from lawyers who’ve worked inside the banks
Our guarantor advice is led by our Founding Partners, who have advised banks and lenders on their loan and guarantee documents.
Michael Lazar
Founding Partner
Formerly NAB and Dentons. Advises banks, credit providers and SMSF lenders on regulation and structuring.
AJ Sridaran
Founding Partner
Formerly Macquarie Bank and Dentons. Legal 500 ‘lawyer to note’ in fintech and financial services regulation.
Recognised by the Legal 500 and Lawyers Weekly
Meet our partners →FAQs
Frequently asked questions
Can the lender come after me before the borrower?
The contract may allow it. But a bank that follows the Banking Code must enforce the borrower’s security first, before it enforces a mortgage over your home. Non-bank lenders may not have the same limits.
Is a family guarantee different?
A family guarantee is usually limited to part of a home loan and secured over a parent’s property. Our guide to understanding family guarantees explains how they work.
Do I need advice to guarantee an SMSF loan?
Lenders usually ask SMSF members to personally guarantee the fund’s loan, and most want a legal advice certificate. The loan itself must also comply with super law, as our article on SMSF lenders and the SIS Act explains.
Can I change my mind after signing?
You can usually withdraw in writing before the loan is first drawn down. After that, release is generally up to the lender, unless the signed loan is materially different from the one you were shown.
Can the borrower come to the meeting?
No. We meet with you on your own so the advice is genuinely independent and you can ask anything you need to.
This page is general information only and is not legal advice. It reflects Australian law at the date of publication. Please contact us for advice about your circumstances.
Talk to us
Ready to book your guarantor advice?
Give us a call and we’ll confirm our fixed price, what to bring and where to meet.