What is the role of a guarantor in secured transactions?

The role of a guarantor in secured transactions is primarily to provide an additional layer of security for the creditor. A guarantor is a third party that agrees to fulfill the debt obligation in the event that the primary debtor defaults. This arrangement helps to mitigate the risk for the lender, as it assures that there is another potential source of payment.

When the principal borrower is unable or unwilling to repay the debt, the guarantor steps in to cover the payment, making them legally responsible for the debt. This relationship is crucial in secured transactions, as it provides assurance to the creditor that the debt will be repaid, thereby enhancing the likelihood of lending and potentially facilitating more favorable loan terms.

In contrast, the other roles mentioned, such as being a primary debtor, collateral, or a creditor overseeing the transaction, do not align with the responsibilities and functions attributed to a guarantor. These roles pertain to different aspects of the secured transaction framework and do not involve the provision of a secondary assurance to the creditor in the case of default. Thus, understanding the guarantor's function is key in grasping how secured transactions operate and the risks involved.