Being a guarantor: what you are really signing up for

Guarantors are what make SACCO lending work. They allow a member to borrow more than their own deposits, backed by the savings of people who know and trust them. But when you accept a guarantor request, you are making a real financial commitment.

What happens to your deposits

When you guarantee a loan, the amount you guarantee is pledged against your deposits for as long as the loan is outstanding. In practice this means:

• The pledged amount is held as security and cannot be withdrawn or used to guarantee another loan.
• Your own borrowing capacity may be reduced while the guarantee is active.
• If the borrower defaults and the loan cannot be recovered from them, the SACCO may recover the outstanding amount from guarantors, in line with the by-laws and loan policy.

Questions to ask before you accept

1. How much, and for how long? Know the amount you are guaranteeing and the loan term.
2. What is it for? A clear purpose is a good sign.
3. Can they afford it? A guarantee is not the place for politeness — ask about their income and other loans.
4. What is my total exposure? Add up all the loans you already guarantee.

Only guarantee an amount you could afford to lose without harming your own family’s finances.

Your rights as a guarantor

• You may decline a request. A good friend will understand.
• You can view the loans you guarantee in the portal under Guarantor requests, including their status.
• When the loan is fully repaid, your pledge is released automatically.

If the borrower starts to struggle

Encourage them to talk to the SACCO early. Options such as rescheduling are far easier to arrange before a loan falls far into arrears — and early action protects everyone’s deposits.