Many consumers are very surprised when applying for a loan if their creditworthiness is not sufficient to take out a loan. A guarantor usually has to come in order to still be able to get the loan. Because a loan with a surety secures the credit to such an extent that the bank includes it in the creditworthiness and enhances the credit accordingly.
The guarantee as a solution for a loan
A loan with a guarantee is not uncommon. It is very popular if the credit rating for the requested loan is insufficient. Among other things, the creditworthiness can be weak if the income is relatively low and if this does not match the loan amount. In addition, a guarantee is generally required when the loan amount is very high. Because the higher the loan amount, the higher the collateral. And a guarantee is considered stable and important security.
The guarantor’s duties
Even if it is usually easy to find a guarantor for a loan with a guarantee, there are still a number of things that need to be considered and considered. Many guarantors approach the guarantee quite impartially and are then surprised if it is precisely this that becomes a problem for them. Because as a guarantor you not only sign the loan agreement, you are also liable for the loan. If the actual borrower defaults on payment, the guarantor is asked to pay by the bank. He is liable for the loan with all his assets.
As a guarantor, you should therefore check carefully whether you have sufficient capital for the guarantee and whether you want to do this to yourself. In addition, you should make a written agreement with the actual borrower on how to get your money back as a guarantor if you have to step in financially for the actual borrower. Not that in the end the guarantor is financially ruined and the actual borrower can lead a good life through his investment.
A loan with a guarantee is not uncommon and is normal for borrowing. The guarantee additionally secures the loan and not only offers the bank additional security. As a guarantor, however, you should always be aware of the responsibility that you assume with the guarantee.