Legal Question in Banking Law in Illinois
To Sign or Not To Sign: Help Me Decide
Hello. A real estate investor has approached me to be the guarantor on a loan so that a 3rd party can receive a business credit line. I would be used so that my good credit would help with loan approval. From what Ive been told, I would need to sign the loan docs but it wouldn't go against my credit score and that I can have my name removed in 30 or 60 days. I would have a contract with the 3rd party as not being responsible for repayment. For all of this I would be compensated. However, in the banks eyes, if my name alone or if my name and the 3rd party's name are on the loan docs even though I have a contract stating Im not responsible for repayment - would the bank see me / come to me for monies due? Can my name be removed from loan docs after 30 or 60 days? Can this work? He has done this before several times, I just need to know Im protected and that I would never be responsible for repayment..and that this is legit.
1 Answer from Attorneys
Re: To Sign or Not To Sign: Help Me Decide
No one can advise you without seeing the actual documents. However, I think it is very unlikely that it will work as you have laid it out. People need guarantors because their own credit is not good enough to get a loan. The bank is very unlikely to let a guarantor off his guaranty in 30 to 60 days unless there is a substitute guarantor of equal or better credit. Your contract between you and the borrower does not take you off the hook, it only lets you go after the borrower. If the borrower cannot pay the bank, he probably cannot pay you either, so you are stuck.
If you are seriously considering putting your credit on the line, have a business attorney carefully review the documentation to make sure that your understand your exposure.
David K. Staub, an Illinois business lawyer
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