When it comes to obtaining guarantors for loan, should the philosophy be "the more the merrier?" That is, if you could get a perfect stranger off the street to sign the guaranty, go for it? [Not that I think that would be very likely...]

Or are there potential legal issues for being selective about choosing guarantors? That is, if a prospective guarantor has a low credit score or some other attributes that would cast some question about his or her creditworthiness, should that prospect be eliminated? If a guarantor subsequently declared bankruptcy, for example, could that cause a dark cloud over an otherwise healthy credit, with other good guarantors, and a good payment record?

Example...a church loan, for which there are say, 12 on the propsect list. Of the 12, 9 are OK, but 3 have potential issues. Do we not worry about the 3 and have them guarantee anyway, since we think we have 9 good ones...or do we just go with the 9, and not abide by "the more the merrier?"

A guarantor is used to support a credit, so a prudent lender will look at a guarantor the same way that he would look at the borrower. The guarantor is the final supporting leg for your credit. If the loan should go bad, the bank will be looking at the guarantor to pay the remainder of the debt after all of the avenues have been exhausted against the borrower(s). Just remember when taking a guarantor, any time the loan is modified or extended, the guarantors will need to be notified and acknowledge approval or the bank may loose the guarantee in court. It can be very hard to make a guarantor pay at times.

However, you can require all 12 of your guarantors if they are allowed as specified in Reg B's commentary provided below. Paragraph 7(d)(6)

1. Guarantees. A guarantee on an extension of credit is part of a credit transaction and therefore subject to the regulation. A creditor may require the personal guarantee of the partners, directors, or officers of a business, and the shareholders of a closely held corporation, even if the business or corporation is creditworthy. The requirement must be based on the guarantor's relationship with the business or corporation, however, and not on a prohibited basis. For example, a creditor may not require guarantees only for women-owned or minority-owned businesses. Similarly, a creditor may not require guarantees only of the married officers of a business or the married shareholders of a closely held corporation.

2. Spousal guarantees. The rules in § 202.7(d) bar a creditor from requiring the signature of a guarantor's spouse just as they bar the creditor from requiring the signature of an applicant's spouse. For example, although a creditor may require all officers of a closely held corporation to personally guarantee a corporate loan, the creditor may not automatically require that spouses of married officers also sign the guarantee. If an evaluation of the financial circumstances of an officer indicates that an additional signature is necessary, however, the creditor may require the signature of another person in appropriate circumstances in accordance with § 202.7(d)(2).