Filter Coffee #016

On Loan Guarantors and Political Correctness

Oct 18, 2020

🖐 Neither a borrower nor a lender be

You may be familiar with these words, dear friends, as the wisdom that Lord Polonius had for his son Laertes as he embarked on his visit to Paris for his education in the first act of Shakespeare’s ‘Hamlet’. At the time when Hamlet was being staged, it was common for the gentry to borrow recklessly to fund their lavish lifestyles, and were often forced to part with their estates to ward off the debt collectors. The Shakespearian phrase rings true even today. All of us, at one time or another, have encountered the painful situation of having lent money to a friend and found ourselves losing both.

What many people don’t realise is that lending a person something doesn’t necessarily mean that they are borrowing from you. The problem with lending is its voluntary character. If a friend comes to you and narrates a situation he is in, you offer to lend them the money they need, often without stipulations, but of course with the hope of getting it back. But in their mind, you are lending of your own volition, and so they are not actively borrowing. It sounds strange but if you reflect on it, the thought process makes sense. If you contrast this with borrowing in the traditional sense, it involves a reason, a predicament, and most importantly, an assurance (sometimes simply a ‘God Promise!’) of timely repayment. So the borrower borrows from you and that’s what you may tell someone “He borrowed and now he is not to be seen or heard”. If it was a case of lending you would say “I lent him some money but he is showing no interest in returning it to me”. You might get a rebuke for that “Who asked you to lend? Better to write it off”.

Interestingly, we don’t take anything in writing when we lend, particularly when we feel compelled to help someone, but we may set some understanding (even if it’s not legal terms) when someone borrows. We shy away from stipulating terms to a friend or relative, but we do it quite willingly when the borrower is your driver or maid. Somehow we do our own credit rating of that person! What an irony, right?

Whether you lend or someone borrows from you, the consequence of non-repayment is the same. As Lord Polonius says, in the same scene: “For loan oft loses both itself and friend, and borrowing dulls the edge of husbandry.” In simple English, it means that when you lend money to a friend, you often lose the friendship as well as the money, while borrowing turns a person into a spendthrift.

A few of my friends tell me that when they lend money to someone they write it off and don’t lose sleep over it. Charitable indeed! Another friend told me in a conspiratorial tone “When I lend money, I not only write it off, but also don’t tell my wife to make sure I don’t lose sleep over it…” Funny guy!

There’s also a second, non-monetary type of lending. A neighbour or friend asks you to lend your iron box, tool box, your scooter or even your car! Well, you need to deal with these requests tactfully. Particularly if the guy borrowing has selective amnesia.

Here’s an anecdote: Bob & Tom are walking back home late at night after a movie. They are accosted by a thug who asks them to hand over all the cash they have. Tom takes out a wad of notes and hands it over to Bob and says “Hey Bob, here’s the money I owe you.” That’s some quick thinking!

Now, I turn to a more serious issue — that of the perils of being a guarantor. The law relating to Guarantees is enshrined in the Indian Contract Act. A contract of guarantee is a three way contract among the borrower (debtor), the lender (creditor) and the surety (guarantor). Usually, a contract requires passing of some consideration. The borrowing and lending constitutes adequate monetary consideration to bind the borrower and the lender. The guarantor does not benefit from the transaction, yet the fact that the borrower gets the loan on his being the surety, is itself sufficient consideration for him to get contractually bound to discharge the debt if the borrower defaults.

One has to be extremely careful before offering to be a guarantor. Let’s imagine a scenario. X borrows a certain sum from Bank B, to conduct his daughter’s marriage. His friend Y agrees to be a guarantor. The Bank accepts him as a solvent guarantor as he draws a good salary and also has property in his name. Now for some unforeseen losses in his business, X defaults on payment to the Bank. The Bank, instead of proceeding against X to recover the money, may get the guarantor’s salary and even his property attached. Here the guarantor’s liability is coextensive with that of the borrower. If you ever find yourself compelled to be a guarantor you could include a condition that the lender must exhaust all remedies against the borrower and then only proceed against the guarantor. But this is easier said than done.

You must exercise a great deal of discretion and circumspection before you lend money or stand guarantor. There have been situations where the borrower is an alcoholic or addicted to drugs unbeknownst to the guarantor and that can cause a lot of grief beyond just the monetary loss. Lending is matter for the mind to decide and not the heart. As difficult as it is, it’s important to keep personal feelings out of the picture, and be purely logical. And sometimes that means steeling yourself to say No! even if the borrower says, “Trust me, I will give it back!”

You must have seen this sign in many stores: “In God we trust, rest in cash.”

Lending money to a relative or standing guarantor to him may cause a lot of heartburn if that relative fails to repay the loan. Besides that relative becoming a persona no grata, estrangement of families could be a collateral damage.

In some cases, a financial institution may want two guarantors. If you are one of the two guarantors you should look out for words “jointly and severally responsible”. These words imply that the lending institution has a choice of coming after both guarantors or only the one who is more solvent. In such cases insisting on joint responsibility is a better option, or better still, make it clear that you stand surety only for a certain sum, which could be 50% of the loan amount or less.

The next logical question would be, “If as guarantor I end up paying, how do I recover it from the original borrower?” Well, law provides for an implied indemnity, which means the original borrower is duty-bound to make good all that you as guarantor were compelled to pay. This can be, in most cases, just a cold comfort as our judicial system is not mercurial enough to provide quick restitution.

To sum up: Neither a borrower nor a lender be, much less a guarantor.

😶Being Politically Correct

As the world gets smaller in the digital age, we often have even the smallest discussions on a public stage, and everyday conversations are influenced by global events and sentiments. So now, more than ever, we need to be aware of how our words affect others, or else we run the risk of political incorrectness.

To understand political incorrectness, we must first learn what the term ‘politically correct’ means? The Cambridge Dictionary has this to say:

“Someone who is politically correct believes that language and actions that could be offensive to others, especially those relating to sex and race, should be avoided.”

A politically correct word or expression is used instead of another one, particularly one with negative connotations, to avoid being offensive. A simple example — Some people consider "fireman" a sexist term, and prefer the politically correct term "firefighter".

Donald Trump rubbished the idea of being politically correct and he spoke on many matters in a derogatory manner. He even suggested America suffers from being politically correct.

So, is calling a spade a spade politically correct? The idiom actually implies terms that may be politically incorrect. It stands for saying the way it is without "beating about the bush", frankly, and directly, even to the point of being blunt or rude. The idiom symbolised openness and plain speaking. But over a period of time calling spade a spade wasn’t considered politically correct particularly if it tended to be insensitive and demeaning. And at its core, politically correct language reflects the attitudes of its time. There was a time when people made personal comments without a qualm. Calling someone who is fat a pig, someone thin a reed, someone short a clown, etc. is now considered body shaming, which is absolutely politically incorrect.

We all come across many jokes about ‘man & wife’ but one has to now be careful when and where you share that joke for there are people who object to your talking about wives in a demeaning way. My wife conducts speech therapy sessions for the hearing impaired. It is politically incorrect to use the phrase “Deaf kids”. Visually impaired, differently abled, physically challenged, learning disabilities are considered politically correct expressions.

I am not into politics, but I am politically correct when I say politics is meant for people who don’t believe in being politically correct.

Please leave your comments with your thoughts on this!

👩‍⚕️ Hats Off to Health Care Workers

My friend Shashi Maudgal, whom I had interviewed in 🔗 Filter Coffee #12, recounted his and his octogenarian mother’s horrifying experience of contracting COVID-19. They were both treated at the Mumbai Breach Candy Hospital. He was all admiration for the Doctors and in particular for other health care workers (a politically correct expression!) from Kerala. He had read about their commitment to serve and the sacrifices they make living away from their families. But his interface with them as a patient and his first hand experience of that selfless service has deeply impacted him. He singled out for acclaim and admiration all the young nurses who hail from Kerala, and who work in hospitals across the nation. He was touched by the way they talk to patients patiently with a smile and for being efficiency personified. Due to demands of the situation, they work two shifts, many a time! He said to me, “the entire class of these nurses, truly sisters, deserve a collective Bharat Ratna.” I couldn’t agree with him more!

Senior Care Consultant

My dear friend Andy, who is a proud Australian senior citizen, never misses an opportunity to advise other seniors on how to manage difficult situations. Here’s his Medicare Plan-G:

“Say you are an older senior citizen and can no longer take care of yourself and the government says there is no Nursing Home care available for you. So, what do you do? You opt for “Medicare Plan G”.

The plan gives anyone 75 or older a gun (Plan G) and one bullet. You are allowed to shoot one worthless politician. This means you will be sent to prison for the rest of your life where you will receive three meals a day, a roof over your head, central heating and air conditioning, cable TV, a library, and all the Health Care you need. Need new teeth? No problem. Need glasses? That's great. Need a hearing aid, new hip, knees, kidney, lungs, or heart? They are all covered!

As an added bonus, your kids can come and visit you at least as often as they do now! And, who will be paying for all of this? The same government that just told you they can't afford for you to go into a nursing home. And you will get rid of a useless politician while you are at it. And now, because you are a prisoner, you don't have to pay any more income taxes!

Is this a great country or what?

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