Becoming a guarantor for a bank loan

Becoming a guarantor

Becoming a guarantor for a bank loan

A close friend may ask you to vouch for their loan from the bank. Even if you want to say ‘no’ from the inside, you usually give the answer ‘I will’ with a smile on your face. You should think twice before taking on a huge responsibility just to avoid saying no. Friendship does not go very well along with business.

When a bank provides a loan with a guarantor in the deal, they collect the debt from the guarantor when they fail to get it from the original borrower. Before it comes to this consideration must be done taking into account the huge risk.

The guarantor undertakes that if the debt is not paid by the borrower, he will take all the responsibility and that he will pay all the debts.

In the event that the loan is not paid back by the original borrower, the guarantor might be facing a process that can go as far confiscation of their assets.

With a guarantor agreement, banks secure the repayments of the loans they give.

Today, the number of people who do not have credit applications to cover their cash needs is very small. Every person will cross paths with banks for a loan application in certain points of their lives.

When banks give loans, they evaluate the customers’ income and expenditure situation and the relationship with other banks in the past.

If the result is positive, however, the banks that still want to guarantee themselves expect to see you bring in a guarantor.

There are many laws that protect the guarantor. Unless everything has been tried to get the debt from the original borrower, the guarantor cannot be asked to pay the debt. A guarantor is only legally responsible when a written agreement is present and the borrower has confirmed that they are aware of the full amount of the debt. If these conditions are not met, there cannot be a discussion about a guarantor.

A guarantor must be someone who is over 18 years of age, has a stable and decent income and can prove it. On top of that, banks also run background checks on guarantors, trying to confirm that they haven’t had any issues with other banks or financial institutions in the past.

If you are married, you should have the consent of your partner to become a guarantor. Reasoning behind this is that everything you own is also half-owned by your partner and in case of the original borrower failing to pay would put your partner’s assets at risk too which is unfair.

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