Rabbi Max Sutton, Rosh Bet Din Aram Soba in Jerusalem, published an article in the May 2010 issue of Community on the halachot of loan guarantors and sureties.  Rabbi Sutton writes:

There are two basic types of guarantee arrangements. The first is known as an ordinary guarantor (arev). An ordinary guarantor is a third party that agrees to be responsible for a debt only if the principal debtor defaults. Hence, the creditor is required to attempt to collect from the debtor, and only after he fails to pay is the guarantor held responsible. The second type of a guarantee relationship is known as a surety-ship (arev kablan). This arrangement enables the creditor to demand payment from either the debtor or the surety, whichever he chooses. The creditor need not exhaust any legal remedies against the principal debtor before holding the surety responsible for payment. Even if the debtor can make payment, the creditor has the right to collect from a surety the moment the debt is due. Once the debt is paid by either a guarantor or a surety, they may then pursue all legal remedies to collect from the debtor the money they laid out to the creditor on his behalf.

The article presents three cases which illustrate the following difficulties:

1. Where the creditor made multiple loans, only some of which were guaranteed, how are partial payments by the debtor allocated between the loans?
2. Where there are multiple guarantors for a single loan, how are partial payments by the debtor allocated between the remaining obligations of the guarantors?
3. Are oral guarantees enforceable?

After discussing the issues, Rabbi Sutton concludes by summarizing the Bet Din’s ruling on each case.  The full article can be read here.