The Signature That Costs You
Every banker has met a Tashi. Tashi is a good man. He is a friend, a cousin, or the neighbour's son who once helped you carry a sofa up three flights of stairs. One day he arrives with tea, a warm smile, and a small request: "It is only a formality. Just sign here as guarantor. The bank needs one more name." You sign, because it would be rude not to. Besides, it is only a formality, isn't it? It is not. What you are actually signing When you stand guarantor, you are not vouching for Tashi's character. You are promising the bank, in writing, that if Tashi stops paying, you will. This is not a ceremonial role, like cutting a ribbon at an inauguration. A guarantee is a legal commitment, and the bank can turn to you for the outstanding amount if the borrower cannot or will not pay. People usually think a guarantee is worth one instalment. It is not. It is worth the whole outstanding loan , plus interest and charges. Tashi's "small" loan, over its...