1.1.G.75 Guarantor arrangements
This definition applies to all payments subject to assets testing.
A guarantor arrangement happens when one person guarantees to a creditor that an amount borrowed by another person will be repaid according to the agreed terms of the loan (1.1.L.65).
The guarantee is usually a contract between the creditor and the guarantor. It may require that assets of the guarantor be secured against the amount borrowed. If the loan is defaulted, the guarantor's nominated asset is sold:
- willingly by the guarantor, or
- forcibly by the financial institution.
The sale method does not affect the right of the guarantor to recover money.
Policy reference: SS Guide 220.127.116.11 Assessing Loans & Guarantor Arrangements