Maybe you have been asked by a friend to sign as a co-maker in a loan transaction. You’re then asked to sign a promissory note or a debt instrument which designates you as a co-maker. There should be no problem with this, as the principal is usually someone the co-maker knows and trusts. However, there are plenty of examples when co-makers are declared liable because the principal debtor was not able to pay. This is a brief discussion on the extent of a co-maker’s liability.
A co-maker may be asked to sign on a space provided on the main loan agreement. In other instances, the co-maker is asked to sign a promissory note that looks like this: “I, ________, as the co-maker of the above-quoted loan, have fully understood the contents of this Promissory Note for Short-Term Loan. That as Co-maker, I am fully aware that I shall be jointly and severally or solidarily liable with the above principal maker of this note.”
In case of breach of contract or non-payment of the loan, the lender may take any of the following options:
- 1. Proceed against the principal debtor;
- 2. Proceed directly against the co-maker even without trying to collect from the principal debtor; or
- 3. Proceed simultaneously against both the principal and the co-maker.
Of course, the co-maker may also go against the principal debtor for reimbursement, but this is not an excuse against the lender.
A co-maker is generally treated as a surety. In a contract of suretyship, one lends his credit by joining in the principal debtor’s obligation, so as to render himself directly and primarily responsible with the principal debtor. A surety is bound equally and absolutely with the principal, and is deemed an original promisor and debtor from the beginning. This is because in suretyship there is but one contract, and the surety is bound by the same agreement which binds the principal.
In some instances, the co-maker would argue that he/she is merely a guarantor, not a surety. The two concepts, of course, are different.
- A surety is an insurer of the debt, whereas a guarantor is an insurer of the solvency of the debtor.
- A suretyship is an undertaking that the debt shall be paid; a guaranty, an undertaking that the debtor shall pay. Stated differently, a surety promises to pay the principal’s debt if the principal will not pay, while a guarantor agrees that the creditor, after proceeding against the principal, may proceed against the guarantor if the principal is unable to pay.
- A surety binds himself to perform if the principal does not, without regard to his ability to do so. A guarantor, on the other hand, does not contract that the principal will pay, but simply that he is able to do so. In other words, a surety undertakes directly for the payment and is so responsible at once if the principal debtor makes default, while a guarantor contracts to pay if, by the use of due diligence, the debt cannot be made out of the principal debtor.
[Source: Palmares vs. CA, G.R. No. 126490, 31 March 1998]
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Can a foreigner not residing in Philippine be a co-maker or guarantee a home loan?
Hi, I would like to ask a more understandable explanation of being a co-maker. I have a workmate who had loan an amount to a lending business and now, I am not seeing her anymore in out company. She even do not answer my calls. And I am bothered if the lending company will ask me to pay the debts or loan she got. Honestly, I do not remember the papers I signed when she loan an amount from the lending company. I even really doesnot understand fully what was written there.
But with the above article you posted, I assume that as a co maker I am just a person who promises that the person who had debts from them promises that this person will pay the amount compairing it to a surety that has the liability of paying the loan itself incase the person would not able to pay for it.
What if the principal debtor dies? What’s the co-maker’s obligation? Will he/she be obliged to pay the whole amount?
parehas po ang situwasyon namin ni fely. ano po ang dapat naming gawin? liable pa po ba kami sa namatay na borrower?
hi, may tanong din po ako, kumuha ng tricycle ang pinsan ko sa isang company, 6 months installment, kinuha nya po akong co-maker, kaya lang po nagkasakit bigla yung pinsan ko na stroke po sya. kaya di sya makapagbayad ng monthly installment dun sa company ng tricycle. at ang problema binenta narin nya yung tricycle sa iba. at binayaran na siya ng buo nung binentahan nya.. ginamit nya yung pera sa pagpapagamot. ang problema, ayaw nya pong sabihin sa akin kung kanino nya binenta, kasi pilit pong pinapa surrender ng companya yung unit, which is hindi nya po pwede sbihin kc, bayad na sknya yung bumili,nahihiya sya dun sa bumili sa knya. kaya ngayon ako ang pinipilit ng company na mag bayad o isurrender yung unit which is hindi ko nga alam kung nasaan. pero nangangako naman yung pinsan ko (principal) na babayaran nya sila. kc my mga property pa na man ang pinsan ko na pwedeng ibenta. at yun ang pambabayad.. ako kc ay wala din kakayahan na mag bayad.. pwede ba nila akong (co-maker) iharass na magbayad at sampahan ng kaso dahil hindi ko cla binabayaran, since nakaka usap at nakikipag negociate pa naman sa kanila yung principal na babayran sila , pwede po ba akong makulong? ano po ang pwedeng mangyari sa co-maker kung tlgang di makpag bayad and principal..at yung papel nga pla na tricycle na pinapirmahan nila sa amin at ay walang tatak na naka mortgaged.. na suposed to be dpat may mortaged yun, dahil installment basisi sya. pwede po ba nila itong ikaso?salamat po.
Question lang po. kasi kami naman nung apply ako sa lending may pinagpartner sa akin na tao then ginawa kaming dalawa na co-borrower with each other, and then ngeon may nagemail sa akin na ung co-borrower ko eh nakasummon na sa court, and I received a txt message na kelangan ko daw po pumunta dun sa court for preliminary hearing. kasi di ko naman po sya kilala talaga ang ginawa lang ni lending pinagsama kaming dalawa para maging co-borrower. may legal obligation po ba ako dito..
hi good pm po,tanong ko lang po yong kuya ko ay mag-aaply para abroad tapos hiningan kami ng current bill para makapaglending sa corporation ng agency na pinag-aaplyan nya,kaso nangungupahan lang po kami ng bahay at submeter lang din po ang gamit namin.Kaya nanghingi kami ng current sa pinsan ko na may sariling kuryente,hinihingan siya ng 2 valid ID,birth certificate,at1x1/2×2 na picture.Ang tanong hindi ba siya pagbabayarin sa i loloan na pera ng kuya ko,kung sakaling magkaabirya.Salamat po!
Last 2005, My friend’s sister borrowed a huge amount from a lending company and until now her sister still didn’t pay for it. So now a noticed was sent to her by the company’s legal counsel to pay her sister’s debt within 5 days. Because it was stated that she’s the co-maker of her sister. As far as she can remember she didn’t sign for anything regarding that matter. But she can’t clarify that. How can she stay away from paying the debt of her sister? And is there any way she can file for forgery since she really didn’t remember signing anything.
I got so many informations and explanations from you. Very helpful for us leaders in a cooperative.
Is the co maker can arrestd and go to jail?.
tanong ko lang po, naisanla ko po yun atm ko last 2012 pa, that time ang net pay ko pa lang ay 4700, ang principal loan ko po ay 167, 000 until now po ay nsa kanila pa din atm ko at wla ako nakukuha na kahit piso na sukli. nang hingan ko po sila ng statement of account eh nakalagay po dun sa isang kapirasong papel na sulat kamay lang ang inabot na ng loan ko eh 447 800, halos kalahating milyon na po, at mahigit na sa naging loan ko ang nababawas kc mag aapat na taon na sa kanila atm ko,nang tanungin ko sila napakatagal sumagot, pabalik balik pa ang asawa ko makuha lang un listahan nila, at ang sabi ieextend pa daw po un payment ko, matatapos po kc un contract this april 2016.ako lang po ang inaasahan ng aming pamilya, salamat sa diyos nakakaraos kmi kahit wla ako nakukuha sa sweldo,hindi na ho makatarungan ginagawa nila, pati un unng midyear ko nung 2012 kinuha na nila pero di nilista as payments ko. panu po ba ang tamang gawin at kanino po pwede magtanong tungkol dito..,sana po masagot nyo ito.