What happens when a loan you guaranteed is not repaid
Law of Contract Act; Sacco Societies regulations · sources read 3 Oct 2026
A guarantee for someone else's debt can only be enforced in court if it is in writing and signed by the guarantor. A SACCO must explain the liability to you before you sign, and tell you in writing within one month after the loan you guaranteed goes into default.
- Deadline
- A SACCO must tell a guarantor in writing within one month after the loan goes into default (non-deposit-taking SACCOs).
- Where
- Your SACCO or lender first; SACCO disputes go to the Co-operative Tribunal (State Department for Co-operatives)
Steps
- Ask your SACCO for full details of how the guaranteed loan is performing. A guarantor must be given this on request.
- Ask the lender for a copy of the guarantee you signed. Without a written, signed guarantee (or a signed note of it), no court case can be brought against you on it.
- If you have a dispute with your SACCO over guarantor deductions, it is a co-operative dispute, heard by the Co-operative Tribunal.
Watch out
- While you still have an outstanding guarantee, a SACCO does not have to refund your deposits when you leave.
- A non-deposit-taking SACCO must update you at least once a year on the loan you guaranteed, so check those updates.
- Deposit-taking SACCOs must also explain the nature of the liability before you sign as a guarantor.
Who this covers
- Anyone who has promised to answer for another person's debt (a guarantor), to any lender.
- SACCO members who guarantee other members' loans have extra protections under the SACCO regulations.
Official sources (4)
- Law of Contract Act (Cap. 23) new.kenyalaw.org · read 3 Oct 2026
- Sacco Societies (Non-Deposit-Taking Business) Regulations, 2020 sasra.go.ke · read 3 Oct 2026
- Sacco Societies Regulations, 2010 (deposit-taking) sasra.go.ke · read 3 Oct 2026
- Co-operative Tribunal ushirika.go.ke · read 3 Oct 2026