A guarantee is made when a third party, the guarantor, agrees to pay back debt if the borrower can't or won't.
When a borrower falls behind with their repayments Arts Tasmania will send a written notice (a default notice) to both the borrower and the guarantor. If the borrower does nothing about the default notice then Arts Tasmania may initiate legal action to have the debt repaid. If this does not resolve the matter then Arts Tasmania can take legal action against the guarantor and they will have to repay the borrower's debt.
Are you offering to be a Guarantor?
If you have agreed to act as a Guarantor for a loan applicant, you must read the following information about your rights and obligations.
Arts Tasmania will contact you and ask you to complete a Credit Check Authorisation. You will also need to provide your last two years of tax returns or a statement showing your last two years of Centrelink payments.
This information will be used to undertake a credit check so we can assess your ability to meet the obligations of the loan application. The credit check will be conducted by the Department of State Growth.
Important information for guarantors
If a loan application is approved, and a Guarantor is required, the successful applicant is known as the ‘Borrower.’
A Guarantor’s obligations are that they agree to guarantee the repayment of a loan by a Borrower in the event that the Borrower can't or won't pay back the debt incurred by the Loan. If this occurs, Arts Tasmania will send a written notice (a default notice) to both the Borrower and the Guarantor.
Details of the Guarantor’s and Borrower’s obligations are outlined in a document known as the Loan Agreement which must be signed by both the Borrower and Guarantor prior to any loan funds being advanced. Your rights and obligations as a Guarantor are listed in detail in the Loan Agreement, so it is imperative that you read it thoroughly prior to signing. You should also read and fully understand any security or mortgage relating to the loan, if security is required for the loan. The Loan Agreement is construed in accordance with the law of the State of Tasmania.
As Guarantor, you should make your own independent investigations and enquiries about the financial position and credit worthiness of the Borrower.
As Guarantor, you should obtain independent legal and financial advice on your obligations under the Loan Agreement or any other security or mortgage relating to the loan.
In the event that a Borrower can't or won't pay back a loan, as Guarantor, you must repay it at the times referred to in Schedule 1 of the Loan Agreement, including interest. (A loan is repaid over a period of months or years in monthly instalments by which each instalment is paid on the 1st day of each month. The interest is calculated on the daily balance outstanding and charged to the account on a monthly basis.)
Payments are made by way of direct debit to a nominated bank account, excluding credit card accounts.
Please also note, where property (an asset) is purchased with the loan, neither you nor the Borrower may dispose of the property which was purchased with the loan proceeds without the prior written consent of the Director of Arts Tasmania whilst the loan or any part of the loan remains outstanding. In addition, whilst the loan or any part of the loan remains outstanding, the borrower or you must insure the property which was purchased with the loan proceeds, and keep it insured, to its full insurable value with a reputable insurance office, against loss or damage in the joint names of the Minister and the Borrower and must pay all premiums and moneys necessary for such purpose when due.