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Co-borrowers and guarantors

People often sign contracts to help family members or partners get credit without realising that this makes them responsible for paying the contract.

Responsibility to repay the debt is different for co-borrowers and guarantors, but you can end up paying the entire debt whichever you are.

Co-borrowers’ liability

It is a common belief that if you are a co-borrower with someone else, you are only legally responsible for paying half the debt. This is not correct.

Co-borrowers have what is known as 'joint and several liability' to pay the debt. This means that each borrower is responsible for the entire debt. If one borrower can’t be pursued for payment, for example, because they go bankrupt, the lender can pursue the other borrower/s for the entire debt. See ‘Joint debt’ (link below).

Guarantors’ liability

For a lender, a guarantee secures the loan. If the borrower cannot pay, the guarantor may lose their home or possessions to pay the debt.

The borrower has primary responsibility to pay the debt. A guarantor has secondary responsibility to pay the debt. This means that the guarantor can’t be pursued by the lender for the debt, unless the lender has first tried to get payment from the borrower/s.

More information

Contracts

Getting help with financial problems

Joint debt

Related publications

Debt problems: the law, your options

Weighing it up

How we can help

Call Victoria Legal Aid’s (VLA) Legal Information Service for free information over the phone about the law and how we can help you with your legal problem. You can speak to a legal information officer in English or ask for an interpreter. Phone (03) 9269 0120 or 1800 677 402 (country callers), Monday to Friday from 8.45 am to 5.15 pm.

VLA’s other free legal services include:

  • advice at VLA offices and other locations across Victoria
  • lawyers who are on ‘duty’ to help at many courts and tribunals.

For some matters we can provide you with a lawyer to help you run your case.

To find out more about any of our legal services see What we do.

Who else can help?

See Getting help with financial problems for details of free financial counselling services in your area and other organisations that can help you.