How to remove a guarantor
In many lending agreements, especially in SACCOs and microfinance institutions, borrowers are often required to have guarantors. A guarantor is someone who agrees to repay a loan if the borrower defaults. While this system builds trust and encourages financial inclusion, there are instances when either the borrower or the guarantor may wish to withdraw from this arrangement. Removing a guarantor is possible, but it involves following a formal process and meeting specific conditions set by the lending institution. Here is how to remove a guarantor.
Reasons for Removing a Guarantor
There are several reasons why one may want to remove a guarantor from a loan agreement. A borrower may want to relieve the guarantor of their obligation, especially if their financial situation has improved and they can now qualify for a loan independently. In other cases, the guarantor may request to be removed due to personal financial strain, changes in their relationship with the borrower, or a lack of confidence in the borrower’s ability to repay the loan. Additionally, a SACCO may advise on the removal of a guarantor if they no longer meet membership requirements or if they have their own active loan commitments that affect their ability to guarantee others.
The Process of Guarantor Removal
To remove a guarantor, the borrower must first consult the lending institution or SACCO to understand the requirements. Most institutions will not allow the removal of a guarantor unless a replacement is provided or the loan has been fully repaid. The borrower is typically required to write a formal request to the loan officer or credit committee indicating the reason for the removal and providing details of a new guarantor if applicable.
Once the request is received, the institution will assess the borrower’s loan status, repayment history, and financial standing. If a new guarantor is proposed, they must meet the SACCO’s criteria, including having enough shares or savings and no outstanding loan guarantees that could hinder their ability to take on new obligations.
In cases where a guarantor is being removed without a replacement, the borrower may be asked to increase their collateral, restructure the loan, or pay off a portion of the loan to reduce the risk. This decision is made by the credit or loans committee, based on the risk level and policies of the institution.
Once the application is approved and the guarantor is officially released, the change is documented and updated in the loan agreement. The guarantor is issued a formal release letter confirming they are no longer responsible for the loan. The borrower, meanwhile, continues to repay the loan under the revised terms.
It’s important to note that the removal process is not immediate. It can take days or even weeks depending on how quickly the borrower fulfills the requirements and how soon the loans committee convenes to review the request. During this time, the original guarantor remains liable for the loan, so borrowers should act swiftly and follow up with the institution.
Author: Andrew Walyaula
Andrew Walyaula is a seasoned multimedia journalist. waliaulaandrew0@gmail.com
