What Is Surety?

Ever been asked to sign surety for debt? Should it be your child’s study loan, a bond, a car, on behalf of your company or any other debt. This is a big responsibility.  You agree to take over payment and be liable for debt should the ‘principal’ not be able to pay it or defaults.

Surety is simply when a person who takes responsibility for another's performance of an undertaking, for example their appearing in court or paying a debt.

“Signing surety basically means that you are using your good credit rating for someone else’s benefit - and undertaking to extend your credit on their behalf too, if necessary. If they default on their debt, the lender will be looking to you for all the missing funds, so you are in effect signing a deal that says you are a co-borrower.” says Shaun Rademeyer, CEO of Better Life Home Loans, SA’s largest bond originator.

Important points to look out for before signing :

  1. Set limits
  • Make sure the document clearly states that the amount of money is limited to the loan amount.
  • The document must contain a clause that states that it is only valid for the duration of the loan period. 
  1. Keep records
  • Always keep copies of all the surety documents you sign.
  • 2 Keep track of loan repayments and correspondence.
  1. Written confirmation
  • Once the loan has been repaid, make sure you receive written confirmation that the surety has been cancelled. You may need to really push to receive it, but it is worth the effort. Attach this document to the personal surety contract and keep it safe. 
  1. Keep your assets safe

Here we can look at a few frequently asked questions when dealing with surety:

Q:When will it be necessary to sign surety for someone?

A: One of the most common incidents in which someone signs surety is when a student needs a study loan and needs a guardian or parent to sign surety on your behalf in order to get a loan to get an education. In most cases the student starts paying once they get employment however, with South Africa’s unemployment rate standing at 27.7% (as at 2017) this deems a much bigger task than expected. You need work experience to get a job but need a job to get work experience.  

Q: Is there any way of avoiding signing surety?

A: If the creditor insists on either settlement or surety, you could avoid the surety if you can apply for a loan and settle the matter once off and pay the bank directly. However, if you need someone to sign surety for you in the first place it could be assumed that you don’t have a sterling credit record, and this is why you need surety in the first place, in which case you won’t be able to get a loan in any event. Surety would be unavoidable in this instance.

Q: What should I consider before signing surety?

A: Obtain a full credit record from your 'partner'.

  1. Establish how your own credit record will be impacted
  2. Establish how much your 'partner' can put down as a deposit
  3. Have a proper written contract drawn up
  4. Put a time limit on the surety 

Q: When can I cancel/withdraw my surety?

A: A surety can only be cancelled with the permission of the creditor. 

If they are willing to cancel a surety, it will only do so if the debt is paid in full or if one surety can be replaced with another or if the remaining surety is financially in a good enough position to satisfy the bank’s requirements. It is very unlikely for a credit to cancel surety or allow the; transfer’ of it but it is not impossible.

IN Conclusion, if you are unsure or are hesitate in signing surety then you should take a step back and ask yourself a simple question, ‘Do I really know what I am committing myself too and is it worth the risk?’



Contact Us

1 + 12 =

Vermeulen Attorneys
powered by Facebook
Cindy-lee Payne
Cindy-lee Payne
would like to thank Kaylee and Cathleen for an awesome service. friendly and very professional. would definitely recommend their serviceread more
Geraldine Bruce
Geraldine Bruce
Mervyn recently assisted me in a case against one of the largest financial institutions. I had really run out of options and Mervyn's knowledge and expertise convinced me right away that he was the one I wanted on my side. Mervyn and his team worked tirelessly and professionally to conclude the matter and I am extremely grateful my 3 year nightmare is finally over. I would definitely recommend Vermeulen Attorneys.read more
Christopher Evans
Christopher Evans
I am very impressed with Mervyn's professionalism, and willingness to go the extra mile. Vermeulen Attorneys have really outdone themselves in assisting me in a very trying time.read more
Cathy Foster
Cathy Foster
I have been using Vermeulen attorneys for more than 3 years in my business. I have had nothing but excellent service and regular feedback on all my cases. I highly recommend them.read more
Liyana Van Heerden
Liyana Van Heerden
Excellent feedback and Results. Vermeulen Attorneys handle all our outstanding accounts and have always proven themselves worthy of settling payment in the shortest of time frames. Their rates is affordable from small to big operating companies. The give excellent feedback so you always know where your case is standing. Glad we started working with them as they are saving us a lot of trouble and money.read more
Rina Snyders
Rina Snyders
WOW! Vermeulen Attorneys is nothing short of AMAZING. They handled my case so professionally and made sure justice was served. I am so grateful to have a lawyer like Mervyn represent me. Thank you. Your work is exceptional.read more
Daniela Pucci
Daniela Pucci
Cannot thank Vermeulen Attorneys enough for the wonderful services delivered from start to end. Due to your attentive & professional advice received on the matter, this created a preferred environment for ones difficulties in any situation. Thank you! this ensured a we underwent kept every attribute to the situation.read more
Pieter Van Rooyen
Pieter Van Rooyen
Lorraine Sigasa
Lorraine Sigasa
Bianca van Heerden
Bianca van Heerden
Next Reviews
Share This