A guarantor is a person or entity that assumes the financial obligation of another party in the event that the original party is unable to fulfill their obligation. In the context of lending, a financial creditor may require the borrower (debtor) to find a guarantor who will co-sign the loan agreement. The guarantor acts as a secondary source of repayment in case the borrower defaults on the loan. The key difference between a guarantor and a surety is that a surety's liability arises as soon as the contract is signed, while a guarantor's liability only arises when the borrower defaults on their obligation.
[Last updated in January of 2023 by the Wex Definitions Team]