Guarantor Held Liable for 49,500 Yuan Business Loan in Default

A rural credit cooperative has obtained a judgment against both a borrower and his guarantor for an unpaid business loan. The ruling underscores the serious financial obligations that guarantors assume when co-signing loan agreements.

In October 2008, Mr. H borrowed 49,500 yuan from a rural credit cooperative in a central Chinese city. The loan carried a monthly interest rate of 12.6005 percent and required monthly interest payments with principal due at maturity. The loan term ran through June 2010.

Mr. G provided a joint liability guarantee for the loan, signing a guarantee contract that covered the principal, interest, penalties, and all costs associated with debt recovery. The guarantee period extended two years beyond the original repayment deadline.

After the loan matured, the borrower failed to make full repayment. The credit cooperative initiated proceedings seeking the outstanding balance of 950 yuan in principal, plus accumulated interest and penalties at 130 percent of the contracted rate for overdue periods.

Neither the borrower nor the guarantor appeared in proceedings or submitted any defense.

The court found that the loan agreement and guarantee contract were both valid and legally binding. The borrower had acknowledged the debt through signed documentation, and the guarantor had accepted joint liability through the guarantee contract.

Under Chinese guarantee law, a joint liability guarantor is equally responsible for repayment alongside the primary borrower. The creditor may demand payment from either party. Once the guarantor satisfies the obligation, they have the right to seek reimbursement from the original borrower.

The court ordered the borrower to repay the remaining 950 yuan principal plus interest and penalties calculated according to the contractual terms with a 30 percent surcharge for overdue periods. The guarantor was held jointly liable for the full amount. The guarantor was also granted the right to recover payments from the borrower after fulfilling the guarantee obligation.

This case serves as an important reminder that acting as a guarantor carries significant financial risk. Individuals should carefully evaluate the borrower’s repayment capacity before agreeing to guarantee obligations, as guarantors can be pursued for the full amount owed.

Disclaimer: This article summarizes a court judgment for educational purposes only and does not constitute legal advice.