In the case of a loan with a guarantee, a family member, life partner or a third person gives a written promise to repay the debt if you become insolvent and cannot pay the repayment. The guarantor must be of legal age and must not have any negative entries in the Credit Bureau.
In the case of a joint and several guarantee, which is the rule in the credit system, the credit institution can demand repayment of the debt from the guarantor in the event of late payment. In the case of a simple guarantee, on the other hand, the guarantor can only be charged if your funds have already been exhausted and a garnishment has already been made.
A loan with a guarantee pays off
If you add a guarantor to your loan, the likelihood of a bank approval increases. This often gives you a better interest rate when you take out a guarantee loan. Another advantage is that the security of the repayment for the bank is increased with a loan with a guarantee. If your own credit rating is not sufficient, you are more likely to receive a commitment for the desired loan.
How does the guarantee work?
For the loan with guarantee, the guarantor must conclude a unilateral contract with the bank. In this surety agreement, the liable party gives the bank the assurance that it will settle the debt with its private assets in the event of a default.
Several guarantors can jointly hedge a single loan. If this is the case, they are liable either as partial borrowers for a pro rata loan amount or as joint and several debtors. The bank can request the entire repayment of the debt from any guarantor, or split the demand for its own selection.
But the guarantor will also be interested in minimizing the risk of default. The higher the security for the guarantor, the more likely he will be to sign the contract for your loan with a guarantee.