The guarantor is a natural person under private law who pledges a guarantee to assume the contractual obligations of the borrower as soon as they are no longer fully or only partly taken on by the lender. Involving a guarantor is necessary whenever the applicant’s own creditworthiness is not sufficiently good from the creditor’s point of view.
There are different reasons for this; they can have their origin both in the income and in the expenditure situation. For the creditor, the guarantor is, so to speak, the security in case of cases, for a solvency of the principal debtor.
Strengthen the credit rating with a guarantee
Whenever lending as a lending, the lender checks and evaluates the creditworthiness of the person seeking credit. Another name for credit rating is creditworthiness. This means the economic capacity that the applicant can repay the loan amount plus the loan interest according to the contract.
Decisive for the credit rating is the income and expenditure situation of the loan seeker. This refers to his monthly regular income in terms of nature, amount and security for the coming years during the repayment period. A basis for decision-making is the lending guidelines of the respective bank. If the applicant’s creditworthiness is not sufficiently good, the loan application will be rejected for lack of creditworthiness.
The credit institution assesses its credit default risk as disproportionately high in this particular case. This is a one-sided, subjective assessment against which the applicant can initially do nothing. The bank can, but does not have to grant a loan under any circumstances.
What are the banks paying attention to?
Regardless of this, every bank approved under the Bank is interested in lending. Lending rates are among their most significant and secure revenues. Nevertheless, a balance must be made between the interest income from lending on the one hand and the credit default risk from shaky lending on the other. If the applicant’s creditworthiness were correct then there would be nothing against lending.
The lender can not do anything in this situation; his hands are bound by his own lending guidelines. Now the applicant is on the train. For him, it’s about improving his credit rating. He has several options; one of them is the provision of a guarantor. This is usually also a natural person of private law, so an end user. However, he may also be a legal entity under private law as a partnership or corporation.
The only decisive factor is the fact that the creditworthiness of the guarantor improves the creditworthiness of the loan seeker so that the lender’s credit risk with the guarantor is eliminated.
How is lending going?
The lender concludes two contracts for the payday loan with guarantor; on the one hand the guarantee contract, and on the other hand the credit agreement. Subsequently, the loan is paid out to the borrower as the primary borrower. The takes over with the monthly installments the loan repayment. As long as that happens smoothly, everything is OK for lenders and guarantors.
In the first payment problem, the creditor turns to the guarantor. Due to the guarantee contract, he is now obliged to enter into the payment obligation of the borrower. Against this background, the guarantee is entered as a contractual obligation to provide information in the Credit Bureau database of the guarantor, as well as the credit in that of the borrower.
5 tips for the loan with guarantee
1. The most important: trust
There should be a close bond of trust between the borrower and the guarantor. Both should, as it is called, know each other well and can rely on each other, that the guarantee is a mere formality. The guarantor should not have to worry that one day it will actually be used.
When a guarantor from the close family and relatives circle must be noted that the guarantee is not contrary to immoral. Here the lender is required to rate a guarantor not only pro forma but also de facto as such.
2. The credit rating of the guarantor
For the credit rating, it is always easier if the guarantor is a natural person of private law; preferably a dependent employee, civil servant or worker with his regular monthly income. For this group of people, the rating of the creditworthiness is simple and smooth; It is automated at almost all credit institutions.
Significantly more difficult and time-consuming is it in the professional groups such as self-employed, tradesmen, craftsmen, insurance and commercial agents or freelancers. Their income situation is very different, and consequently, the credit check is more complex overall. The loan seeker is in danger of “getting upset by the rain” with such a guarantor.
3. Correct information and complete information
The guarantor must be aware that his income situation is screened by the lender as well as that of the loan seeker. On the expenditure side, this applies to all financial liabilities with and without Credit Bureau, and not all contracts are also entered in the Credit Bureau database; However, in addition they must be given in full within the scope of a detailed self- report.
The same applies to the revenue side. No information about it is recorded in the Credit Bureau database. The Credit Bureau entry of the guarantee as a financial liability has an impact on the Credit Bureau score of the guarantor. The score can change with its percentage points in the future, because it adds to the already existing another liability.
4. Only with absolute fianzieller security
In order to be completely safe in his own interests as well as in the interests of his family, the guarantor should secure the guarantee financially in the same way as taking out his own loan. A life is long; it is neither predictable nor predictable in many ways.
The claim as guarantor remains latent until the borrower has paid the last loan installment. If the guarantee is claimed and the guarantor can not service it, then the obligation to pay remains with him; or put another way, he stays on debt.
There are several unattractive occasions, up to his demise. In this case, the heirs must accept the obligation if they do not want to turn down the entire inheritance.
5. Pay close attention to the phrasing
The guarantor should pay particular attention to the term “security agreement” in the guarantee contract. The term “wider…..” means that the guarantee once granted applies not only to the loan in question but also to the borrower’s further lending to its lender.
With the far-reaching security agreement, the automatic consent is also guaranteed to guarantee the future liabilities of the borrower. The given guarantee may therefore only apply to this eligible loan and must be limited to it.
With banks is not to be joking! They are adamant and literally do not talk to each other when it comes to their money.