Being a co-maker in the Philippines is not a harmless “character reference.” If the borrower stops paying, the lender may be able to collect from you directly, garnish your salary or bank deposits after judgment, levy personal property, or include you in a court case even if you never received the loan proceeds. The exact risk depends on one thing above all: what you signed—especially whether the document makes you a solidary co-maker, surety, guarantor, accommodation party, or merely a witness.
What Is a Co-Maker in Philippine Loans?
A co-maker is a person who signs a loan document together with the borrower and undertakes to answer for the loan if it is not paid. In everyday Philippine lending, the term appears in:
- bank salary loans;
- cooperative loans;
- motorcycle or appliance financing;
- lending company and online loan documents;
- company employee loans;
- promissory notes;
- private loans between relatives or friends;
- educational, business, or emergency loans.
In law, “co-maker” is not always a precise category by itself. Courts will look at the actual wording of the promissory note, loan agreement, surety agreement, or disclosure statement.
The most important phrases to watch for are:
- “solidarily liable”
- “jointly and severally liable”
- “co-maker and principal debtor”
- “surety”
- “guarantor”
- “liable as primary obligor”
- “waives benefit of excussion”
- “payable on demand against borrower and/or co-maker”
If the document says you are solidarily liable, the lender usually does not need to exhaust collection against the borrower first. The lender can demand payment from you, from the borrower, or from both.
Co-Maker vs Guarantor vs Surety: Why the Difference Matters
Many people say, “I only signed as guarantor,” but the document may actually make them a surety or solidary co-debtor.
Under Article 2047 of the Civil Code, a guarantor binds himself to fulfill the obligation of the principal debtor if the debtor fails to do so. But the same article says that if a person binds himself solidarily with the principal debtor, the contract is called suretyship and the rules on solidary obligations apply. (Lawphil)
| Role |
Practical meaning |
Can the lender collect from you immediately? |
| Witness |
You only witnessed the signing |
Usually no, unless you also agreed to be liable |
| Simple guarantor |
You answer only after the borrower defaults and legal remedies are exhausted |
Usually not immediately |
| Surety |
You bind yourself solidarily with the borrower |
Yes, generally |
| Solidary co-maker |
You are treated like a direct debtor for the loan |
Yes, generally |
| Accommodation party in a negotiable instrument |
You sign to lend your name or credit to another |
Often yes, subject to the document and defenses |
A true guaranty is not presumed. Article 2055 of the Civil Code requires guaranty to be express and limits it to what is stipulated. (Lawphil) This helps co-makers when the document is vague. But many Philippine loan forms are not vague: they expressly state that the co-maker is “jointly and severally” or “solidarily” liable.
The Legal Basis for Co-Maker Liability in the Philippines
Solidary Liability Under the Civil Code
The key rule is in Article 1207 of the Civil Code: there is solidary liability only when the obligation expressly says so, when the law requires it, or when the nature of the obligation requires solidarity. (Lawphil)
If the loan agreement says “solidarily,” “jointly and severally,” or similar wording, Article 1216 becomes crucial: the creditor may proceed against any one of the solidary debtors, some of them, or all of them simultaneously, and demand against one does not prevent later demand against the others until the debt is fully collected. (Lawphil)
In plain English: if you signed as a solidary co-maker, the lender may choose to run after you even if the borrower is still alive, employed, or locally present.
This often feels unfair to co-makers because they did not benefit from the loan. But Philippine law generally respects contracts. Article 1159 of the Civil Code provides that obligations arising from contracts have the force of law between the parties and must be complied with in good faith. (Lawphil)
Benefit of Excussion for a True Guarantor
A true guarantor has an important protection called the benefit of excussion. This means the creditor must first exhaust the debtor’s property and legal remedies before compelling the guarantor to pay.
Article 2058 of the Civil Code states that the guarantor cannot be compelled to pay unless the creditor has exhausted all the property of the debtor and resorted to all legal remedies against the debtor. (Lawphil)
But this protection does not apply in several common situations. Under Article 2059, excussion does not take place when:
- the guarantor expressly renounced it;
- the guarantor bound himself solidarily with the debtor;
- the debtor is insolvent;
- the debtor absconded or cannot be sued in the Philippines, unless a manager or representative remains;
- it can be presumed that execution against the debtor’s property would not satisfy the obligation. (Lawphil)
This is why the phrase “waives benefit of excussion” is serious. It means the person signing is giving up one of the usual protections of a guarantor.
The Co-Maker’s Right to Reimbursement
If you pay the lender, that does not automatically mean the borrower gets away with it.
Article 2066 of the Civil Code provides that a guarantor who pays for a debtor must be indemnified by the debtor. The indemnity may include the total amount paid, legal interest from the time payment was made known to the debtor, expenses after notice to the debtor, and damages when due. Article 2067 also gives the paying guarantor subrogation, meaning the guarantor steps into the creditor’s rights against the debtor. (Lawphil)
For solidary debtors, Article 1217 also allows the paying solidary debtor to recover from co-debtors their corresponding shares, subject to the rules on interest and insolvency. (Lawphil)
In practice, however, reimbursement is only useful if the borrower has income, property, or willingness to pay. A co-maker often ends up paying first, then chasing the borrower later.
What Happens If the Borrower Does Not Pay?
The usual process depends on the lender, amount, documents, and whether the borrower or co-maker contests the claim.
1. The Loan Goes Into Default
A borrower defaults when payment is not made on the due date, or when the loan agreement says default occurs. Some contracts also allow default if:
- the borrower loses employment;
- post-dated checks bounce;
- the borrower gives false information;
- the borrower becomes insolvent;
- collateral is lost or impaired;
- the borrower violates another loan term.
Once default occurs, the lender may accelerate the loan if the agreement allows it. Acceleration means the lender treats the entire unpaid balance as immediately due, not just the missed installment.
2. The Lender Sends Demand Letters or Collection Notices
The lender may send demand letters to the borrower and co-maker. These may come by registered mail, courier, email, SMS, or personal delivery, depending on the agreement and lender’s practice.
A proper demand letter usually states:
- the loan account number;
- principal balance;
- accrued interest;
- penalties or charges;
- deadline to pay;
- warning of legal action;
- name and authority of the collection agency or law office, if any.
Do not ignore demand letters. Even if you dispute liability, keep copies. They may matter later for interest computation, proof of default, settlement discussions, and court pleadings.
3. The Lender May Contact the Co-Maker
If you are a solidary co-maker, the lender may demand full payment from you. If you are a simple guarantor, you may raise excussion if legally available.
For regulated banks, financial institutions, financing companies, and lending companies, collection must still be done lawfully. The BSP’s financial consumer protection rules prohibit BSP-supervised institutions and their collection agents from abusive collection or debt recovery practices, while allowing reasonable and legally permissible collection. (Bangko Sentral ng Pilipinas) The SEC also identifies MC No. 18, series of 2019 as its circular on the prohibition of unfair debt collection practices by financing and lending companies. (SEC Appointment System)
Collectors should not use threats, public shaming, obscene language, false criminal accusations, or harassment of family members, employers, or social media contacts.
4. Barangay Conciliation May Be Required in Some Private Disputes
If the lender and the borrower or co-maker are natural persons who live in the same city or municipality, barangay conciliation under the Katarungang Pambarangay system may be required before filing in court.
The Supreme Court has treated prior barangay conciliation, when applicable, as a pre-condition to court action. A case filed without it may be dismissed for prematurity or failure to state a cause of action, or proceedings may be suspended and referred to the Lupon. (Lawphil)
Barangay conciliation usually does not apply when:
- one party is a corporation, bank, financing company, or juridical entity;
- the parties live in different cities or municipalities, subject to legal exceptions;
- the dispute involves urgent provisional remedies;
- the law excludes the dispute from barangay conciliation.
If barangay conciliation succeeds, the settlement can be enforceable. If it fails, the barangay issues a Certification to File Action, which may be attached to the court complaint when required.
5. The Lender May File a Small Claims Case
For many unpaid loans, the lender files a small claims case in the first-level court: Metropolitan Trial Court, Municipal Trial Court in Cities, Municipal Trial Court, or Municipal Circuit Trial Court.
As of the Supreme Court’s Rules on Expedited Procedures in the First Level Courts, small claims cover money claims up to ₱1,000,000, including claims for money owed under loans and other credit accommodations. The rules no longer distinguish between Metro Manila and non-Metro Manila thresholds. (Supreme Court of the Philippines)
Small claims are designed to be faster and simpler:
- lawyers generally do not appear as counsel during the hearing;
- forms are used;
- there is usually only one hearing day;
- judgment is rendered within 24 hours from termination of the hearing;
- the decision is final, executory, and unappealable. (Supreme Court of the Philippines)
This is why co-makers should take small claims seriously. A “small claims” case can still result in a judgment that may be executed against wages, deposits, vehicles, appliances, or other non-exempt property.
6. Larger Claims May Proceed Under Summary Procedure or Ordinary Civil Action
If the claim exceeds the small claims threshold but is still within first-level court jurisdiction, it may fall under summary procedure or ordinary civil rules depending on the nature of the claim.
Under RA 11576, first-level courts have expanded jurisdiction over civil actions where the amount of the demand does not exceed ₱2,000,000, exclusive of interest, damages, attorney’s fees, litigation expenses, and costs. Claims exceeding that generally fall under the Regional Trial Court, depending on the action. (Lawphil)
The Supreme Court’s expedited rules also state that civil actions and complaints for damages where the claim does not exceed ₱2,000,000 are covered by summary procedure. (Supreme Court of the Philippines)
7. If the Lender Wins, the Court May Issue a Writ of Execution
Winning a case does not automatically put money in the lender’s hands. The lender must move for execution if the judgment is not voluntarily paid.
Execution may involve:
- garnishment of bank deposits or receivables;
- salary garnishment, subject to legal limits and exemptions;
- levy on personal property such as vehicles, equipment, or valuable movables;
- levy on real property, if legally available and properly registered;
- public auction of levied property;
- examination of the judgment debtor in court regarding assets.
A co-maker named in the judgment may be subject to execution like the borrower.
Can a Co-Maker Be Sued Without the Borrower?
Yes, if the co-maker is solidarily liable.
Under Article 1216 of the Civil Code, the creditor may proceed against any solidary debtor, some of them, or all of them at the same time. (Lawphil)
However, whether the lender should include the borrower depends on strategy, court rules, and the exact claim. Many lenders sue both borrower and co-maker because it avoids later disputes and increases the chance of collection. But if the document clearly creates solidary liability, the co-maker should not assume that the borrower must be sued first.
If you are only a simple guarantor and did not waive excussion, you may argue that the lender must first exhaust remedies against the borrower.
Can a Co-Maker Go to Jail If the Borrower Does Not Pay?
For an ordinary unpaid loan, no. The Philippine Constitution states that no person shall be imprisoned for debt or non-payment of a poll tax. (Supreme Court E-Library)
But there are important exceptions in real life. A person may face criminal exposure not because of the debt itself, but because of a separate criminal act, such as:
- issuing a bouncing check under Batas Pambansa Blg. 22;
- committing estafa under Article 315 of the Revised Penal Code, when deceit or fraud exists;
- falsifying documents;
- using another person’s identity;
- submitting fake payslips, employment certificates, IDs, or collateral papers.
BP 22 penalizes the making, drawing, and issuance of a check without sufficient funds or credit. (Lawphil) The Supreme Court has also clarified that imprisonment remains legally possible for BP 22 in proper cases, although fine-only penalties may be preferred depending on the circumstances. (Lawphil)
If you signed only as co-maker and did not issue a check or commit fraud, the borrower’s non-payment alone should not make you criminally liable.
Practical Steps If You Are a Co-Maker and the Borrower Stopped Paying
1. Get and Read Every Document You Signed
Ask for copies of:
- loan agreement;
- promissory note;
- disclosure statement;
- amortization schedule;
- suretyship or co-maker agreement;
- post-dated check acknowledgment, if any;
- notices of default;
- demand letters;
- statement of account;
- receipts of payments made by the borrower.
Look specifically for:
- “solidarily liable”;
- “jointly and severally”;
- “surety”;
- “guarantor”;
- “waiver of excussion”;
- interest rate;
- penalty rate;
- attorney’s fees;
- acceleration clause;
- venue clause;
- arbitration clause;
- consent to salary deduction or assignment.
2. Ask for a Recomputed Statement of Account
Do not rely on a collector’s verbal amount. Request a written breakdown showing:
| Item |
What to check |
| Principal |
Original loan less actual payments |
| Interest |
Whether the rate is written and correctly applied |
| Penalties |
Whether they are contractual and not excessive |
| Collection fees |
Whether authorized by the agreement |
| Attorney’s fees |
Whether stipulated and reasonable |
| Rebates or insurance |
Whether any refundable amounts should be credited |
| Payments by borrower |
Whether all deposits, salary deductions, or remittances were posted |
Interest and penalties may be questioned if they are not agreed in writing or are unconscionable. The Supreme Court has nullified exorbitant and unconscionable loan interest and penalty charges in proper cases. In a 2024 Supreme Court notice, the Court described a compounded rate reaching 42% per annum as unconscionable and deemed it not written in the loan contract. (Supreme Court of the Philippines)
3. Communicate in Writing
If you dispute the amount or your liability, reply in writing. Keep the tone calm and factual.
Useful points to raise include:
- you are requesting complete loan documents;
- you dispute being solidarily liable, if the document does not clearly say so;
- you invoke benefit of excussion, if you are a simple guarantor and did not waive it;
- you request proof of the borrower’s default;
- you request proof of authority of the collection agent;
- you are willing to discuss a reasonable payment arrangement, if that is true;
- you object to harassment, threats, public shaming, or contact with unrelated third parties.
4. Consider Paying Under a Written Settlement Only
If you decide to settle, avoid vague verbal arrangements. A written settlement should state:
- total settlement amount;
- payment schedule;
- whether the amount is full settlement or partial payment;
- waiver or reduction of penalties;
- release of the co-maker after payment;
- return of checks, if applicable;
- undertaking to update credit records, if applicable;
- who signs for the lender and proof of authority.
If paying a collection agency, ask for proof that it is authorized to receive payment. Pay through traceable channels and demand official receipts or written acknowledgments.
5. If You Pay, Preserve Your Right to Collect From the Borrower
Before or immediately after paying, notify the borrower in writing. This matters because the Civil Code recognizes reimbursement and subrogation rights for a paying guarantor, but the debtor may raise defenses if payment was made without notice in some situations. (Lawphil)
Keep:
- proof of your payment;
- statement of account;
- settlement agreement;
- demand letter from lender;
- your notice to borrower;
- borrower’s replies or admissions;
- proof of borrower’s payments, if any.
You may later file a claim against the borrower for reimbursement, depending on the amount and evidence.
Common Defenses of a Co-Maker
A co-maker may have defenses, but they depend heavily on the facts and documents.
The Signature Was Forged
Forgery is a serious defense. If your signature was forged, gather:
- specimen signatures;
- IDs;
- employment records showing you were elsewhere;
- messages proving lack of consent;
- police blotter or complaint, if appropriate;
- handwriting examination, if the case requires it.
Do not make a forgery claim lightly. Courts require proof.
You Signed as Witness Only
If your name appears under “witness” and there is no undertaking to pay, you may argue you are not liable as debtor, guarantor, or surety. But if you signed on the co-maker line, or initialed pages containing solidary liability, this defense becomes harder.
The Guaranty Was Not in Writing
Under Article 1403 of the Civil Code, a special promise to answer for the debt, default, or miscarriage of another must be in writing and subscribed by the party charged; otherwise, it is unenforceable unless ratified. (Lawphil)
This defense may help when the lender relies only on an oral promise such as, “Ako bahala kapag hindi siya nagbayad.”
The Co-Maker’s Liability Was Limited
Article 2055 says guaranty cannot extend beyond what is stipulated. (Lawphil) If the document limits the co-maker’s liability to a specific amount, term, or loan, the lender should not automatically extend it to renewals, restructuring, new loans, or increased credit lines unless the agreement covers those.
The Loan Was Changed Without Your Consent
If the lender and borrower materially changed the loan—such as increasing the principal, extending the term, changing interest, or restructuring the account—without the co-maker’s consent, the co-maker may have defenses depending on the wording of the original undertaking.
Many bank forms try to prevent this defense by making the co-maker consent in advance to renewals, extensions, restructuring, or modifications. Read the document carefully.
The Interest or Penalty Is Excessive
Philippine courts may reduce or nullify unconscionable interest, penalties, and charges. This does not automatically erase the principal loan, but it may reduce the amount collectible.
A co-maker should check whether:
- interest is stated in writing;
- penalties are being compounded;
- interest is charged on unpaid penalties;
- attorney’s fees are automatically added before a case is filed;
- the total charges are grossly disproportionate.
The Debt Has Prescribed
Prescription means the legal period to sue has expired. The period depends on the type of obligation and document. Written contracts generally have a longer prescriptive period than oral obligations. Payments, written acknowledgments, or restructuring agreements may interrupt or affect prescription.
Do not assume an old debt is automatically unenforceable. Check dates carefully.
Special Situations Filipinos Commonly Face
Co-Maker for a Relative
This is one of the most common scenarios. A sibling, cousin, parent, or in-law asks you to sign “for formality only.” Later, the borrower disappears or stops paying.
In law, family relationship does not erase a signed obligation. If you are solidarily liable, the lender may collect from you. Your remedy is usually to pay, settle, defend the case, and then seek reimbursement from the relative.
Co-Maker for an Employee Loan
Some employers or cooperatives require co-makers for employee loans. If the borrower resigns or is terminated, the account may become immediately due.
Check whether the agreement allows salary deduction from the co-maker. Salary deductions generally need a legal or contractual basis. If a court judgment exists, garnishment may be pursued through proper court process.
OFW or Filipino Abroad as Co-Maker
If you signed in the Philippines before leaving, you may still be sued in the Philippines. If you are abroad, service of summons becomes more complicated, but not impossible. The Rules on Expedited Procedures also recognize service and notices through modern means in small claims, including mobile phone calls, SMS, and instant messaging applications under certain conditions. (Supreme Court of the Philippines)
Documents signed abroad for use in the Philippines may require consular notarization or an apostille, depending on the country and purpose. The Philippines is a party to the Apostille Convention, so documents from other apostille countries are commonly authenticated through apostille rather than traditional consular legalization.
Foreigner as Co-Maker in a Philippine Loan
Foreigners can generally enter into contracts in the Philippines, including loan-related undertakings, subject to capacity and applicable law. If a foreigner signs as a co-maker, Philippine courts may enforce the obligation if jurisdiction, service, and proof requirements are met.
A civil debt case usually does not create an immigration hold-departure order by itself. Hold-departure issues are more commonly associated with criminal cases or specific court orders, not ordinary civil collection.
Married Co-Maker
Marriage does not automatically make the other spouse liable for every loan. Under the Family Code, the absolute community or conjugal partnership may be liable for debts contracted during the marriage by both spouses, by one with the consent of the other, or by one spouse without consent only to the extent the family benefited. Article 94 covers absolute community property, while Article 121 covers conjugal partnership obligations. (Lawphil)
If a spouse signed as co-maker for a friend’s personal loan, the lender may still pursue the signing spouse personally. But whether community or conjugal property can be reached may depend on consent, benefit to the family, property regime, and proof.
Documents Co-Makers Should Prepare
| Situation |
Documents to gather |
| You received a demand letter |
Demand letter, envelope, texts, emails, statement of account |
| You dispute signing |
IDs, specimen signatures, proof of location, copy of alleged document |
| You signed but dispute amount |
Loan agreement, amortization, receipts, payment history |
| You want to settle |
Updated statement, authority of collector, written compromise agreement |
| You already paid |
Official receipts, proof of transfer, release, notice to borrower |
| You plan to sue borrower for reimbursement |
All payment proof, written demands, borrower’s acknowledgment, lender documents |
| You were harassed by collectors |
Screenshots, call logs, recordings where lawful, witness statements, complaint details |
Practical Timeline: From Default to Court Collection
Timelines vary widely, but this is a realistic Philippine pattern:
| Stage |
Usual timeline |
What happens |
| Missed payment |
1–30 days |
Reminder calls, SMS, late fees |
| Internal collection |
30–90 days |
Demand letters, restructuring offers |
| External collection or legal department |
60–180+ days |
More formal demand, possible settlement |
| Barangay conciliation, if applicable |
A few weeks to 2 months |
Mediation before Lupon, possible settlement or certificate |
| Small claims filing |
Depends on court docket |
Forms filed with first-level court |
| Small claims hearing |
Usually set within court timelines; may be extended in some cases |
Parties appear with evidence |
| Judgment |
Within 24 hours from hearing termination under the small claims rules |
Final and executory |
| Execution |
Weeks to months, sometimes longer |
Garnishment, levy, auction, or payment arrangement |
Bottlenecks often include wrong addresses, unserved summons, incomplete documents, court docket congestion, failed settlement talks, and difficulty locating attachable assets.
How to Reduce Your Risk Before Signing as Co-Maker
Before signing, ask yourself:
Can I afford to pay the entire loan if the borrower defaults?
If the answer is no, do not sign.
Is my liability limited in writing?
A verbal promise from the borrower that “I will pay” does not protect you from the lender.
Does the document say solidary, surety, or jointly and severally liable?
Those words usually mean the lender can collect from you directly.
Is the loan amount blank or incomplete?
Never sign blank forms, blank promissory notes, or incomplete disclosure statements.
Are interest, penalties, and fees clear?
Ask for the total amount payable, not just the monthly installment.
Is the borrower financially stable?
Good intentions do not pay court judgments.
Will the loan affect your credit, employment, or family finances?
A co-maker obligation can become a serious financial burden.
A practical middle ground is to refuse solidary liability but offer another form of support, such as helping the borrower organize documents, budgeting, or finding a smaller loan. If the lender requires a co-maker, that is already a signal that the lender sees repayment risk.
Frequently Asked Questions
Can a lender collect from the co-maker first?
Yes, if the co-maker signed as a solidary co-maker or surety. Under Article 1216 of the Civil Code, the creditor may proceed against any solidary debtor, some of them, or all of them at the same time until the debt is fully collected. (Lawphil)
Is a co-maker the same as a guarantor?
Not always. A simple guarantor usually has the benefit of excussion, meaning the creditor must first exhaust remedies against the borrower. A surety or solidary co-maker is more directly liable. The wording of the loan document controls.
Can I be forced to pay even if I did not receive the loan money?
Yes, if you validly signed as solidary co-maker, surety, or guarantor. Your liability comes from your promise to answer for the debt, not from receiving the proceeds. Your remedy after payment may be reimbursement from the borrower.
Can the lender garnish my salary as co-maker?
Not immediately just because the borrower defaulted. Generally, garnishment requires a court case, judgment, and writ of execution. Once there is a judgment against you, salary or other credits may be reached through proper legal process, subject to exemptions and limits under law.
Can collectors call my employer or relatives?
They may use reasonable and lawful means to collect, but they should not harass, threaten, shame, or disclose debt information to unrelated persons in an abusive manner. BSP and SEC-supervised entities are subject to financial consumer protection and unfair debt collection rules. (Bangko Sentral ng Pilipinas)
What if the borrower promised to reimburse me but refuses?
Put your demand in writing. If the amount is within the small claims threshold, you may consider a small claims case for reimbursement, supported by proof that you paid the borrower’s debt and that the borrower is legally bound to indemnify you.
Can I remove myself as co-maker?
Usually not unilaterally. You need the lender’s written release, substitution of another acceptable co-maker, full payment, refinancing, or a settlement that expressly releases you. A private agreement between you and the borrower does not bind the lender unless the lender agrees.
What if the loan was renewed without telling me?
You may have a defense if the renewal, restructuring, or increase materially changed your risk without your consent. But many co-maker forms include advance consent to extensions or renewals. Review the exact language before relying on this defense.
Can a co-maker be blacklisted?
A lender may report delinquency to credit bureaus or internal risk systems if legally permitted and accurate. If the report is wrong, outdated, or based on a disputed account, request correction in writing and keep proof.
Is notarization required for a co-maker agreement?
A loan or guaranty can be binding even if not notarized, as long as legal requirements are met. Notarization strengthens the document’s evidentiary value and converts it into a public document, but the absence of notarization does not automatically erase liability.
Key Takeaways
- A co-maker in the Philippines can become directly liable if the document says solidarily liable, jointly and severally liable, or surety.
- A true guarantor may invoke the benefit of excussion, but this protection is lost when waived or when the guarantor binds himself solidarily.
- The lender may sue the co-maker, the borrower, or both if there is solidary liability.
- Ordinary debt does not lead to imprisonment, but bounced checks, fraud, falsification, or estafa may create separate criminal issues.
- Small claims cases now cover loan-related money claims up to ₱1,000,000, with simplified procedure and final, executory, unappealable decisions.
- If the co-maker pays, the co-maker may seek reimbursement from the borrower, but practical recovery depends on evidence and the borrower’s ability to pay.
- Never sign as co-maker unless you are prepared to pay the whole debt if the borrower defaults.