A guarantor is a third party who you nominate as your rescuer. In the event that you are not able to repay a loan or meet other financial obligations, some lenders require that you specify someone such as a family member, friend or colleague who would be legally responsible to pay off the debt on your behalf.
For example…
Home loan lenders typically ask for guarantors. As part of a home loan application, they may ask you to nominate a family member or friend who would then have to sign as a guarantor. This way, the lender is covering themselves in case you go bankrupt and can’t afford to pay off your home. The guarantor will then be legally responsible to pay off your home loan.
