Can a Loan Guarantor Back Out?

Ask the Rov: Can a guarantor retract his commitment to back the loan?

By Rabbi Chaim Hillel Raskin – Rov of Anash in Petach Tikvah

An arev, one who volunteers to be a guarantor for a loan, is responsible to repay the loan if the borrower doesn’t pay.

His halachic responsibility begins at the initiation of the loan if that was their agreement, or he can take it on later through making a kinyan to create his obligation. After that, he normally cannot back out, since the lender relied on him to give or to continue with the loan.

Under certain circumstances, however, he may retract his responsibility.

After his commitment, but before the loan is actually given, the arev may retract orally or in writing, even if a kinyan was made. His responsibility only begins once he sees that the lender counted upon him and lent the money. Until then, his guarantee is deemed a mere asmachta, a conditional commitment.1

If the time to collect the loan arrived and the lender extended the time or procrastinated to ask for the loan, some hold that the arev may retract at that point. Others say that the arev may only retract if he specified a time limit to his responsibility.2 If the borrower was ready to pay and the lender neglected to collect it, all agree that the arev is not responsible anymore.3 (An arev kablan, who allows the lender to collect from him even as a first option, cannot discharge himself for this reason.4)

If the borrower was wasting the borrowed money, poskim write that the arev can back out from his responsibility due to the concern that the borrower won’t have the money to repay the loan.5 Yet, if the borrower’s finances are depreciating due to no fault of his, the arev cannot retract.6

If the arev finds out that the borrower is a crook and never intended to repay the loan, or he found out something similar, he cannot retract from being an arev, since the lender only went through with the loan because he was relying on the arev.7

See Sources (open PDF)

From The Weekly Farbrengen by Merkaz Anash

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