In finance, a guarantor is a person or entity which guarantees repayment of a debt owed by a third party. The guarantee provided by a guarantor is known as a surety.
A guarantor may be an individual, as is the case when a person with good creditworthiness undersigns a mortgage, credit card or personal loan provided to another person who would not otherwise be able to obtain the loan due to insufficient creditworthiness. If the person with poor creditworthiness fails to repay the loan, their guarantor is legally obligated to repay it on their behalf.
An insurance company, securities broker, asset manager or bank may also act as a guarantor on behalf of a client seeking a loan from another entity. A surety bond is an example of a loan agreement in which a financial services provider acts as guarantor on behalf of a client.
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