Loan surety involves accepting financial responsibility for a loan that someone else takes. Not everyone knows that in the event of a borrower’s problems with repayment, it is the guarantor who will have to repay the debt incurred by someone else. To minimize the risk, it is worth establishing a contract that will secure us to some extent against negative legal and financial consequences. Let’s see how to become a guarantor safely and when it is not worth agreeing to grant a surety.
A surety for a loan is nothing more than a commitment of the payee towards the creditor. Then the contract indicates the details of the guarantor, who is the so-called guarantor of the loan and becomes a joint and several co-debtor. Guaranteeing a loan can be a salvation for a person who in the past did not repay the loan or loan installments on time. These people can apply for a loan again, but the basic requirement is having a guarantor.
Who is responsible for the debt?
When signing the contract, the guarantor accepts part of the responsibility, and thus, if the borrower fails to pay the loan, he will have to cover part of the amount set out in the loan contract. At the beginning, the amount for which the guarantor will be responsible is determined. Few people know that you do not need to spend the whole amount – and this is very important information. It is often possible to set the duration of the surety, and when the deadline expires, the guarantor will no longer be responsible for the debt with his property.
Should we always agree to the loan surety? Certainly not. We should not agree to a surety if we want to apply for a loan or credit, and being a guarantor may have a negative effect on our creditworthiness. Until the loan is repaid, our creditworthiness will be lower. This has a particularly large impact on the positive consideration of our application when applying for a mortgage for an apartment.
Let’s not guarantee a loan when we know that the person who is asking us may have problems paying it back. Let’s not agree if the borrower has unstable work or has had problems repaying the loan installments in the past. If something goes wrong, the guarantor will have to pay back the loan, which certainly will not be a cause for joy.
The guarantor must pay someone else’s debt when the creditor is late paying his debt. In this case, we should repay the installment immediately to avoid unpleasant legal consequences in relation to our person. The creditor should inform us about the necessity of repayment, in accordance with the provisions of the Civil Code. Before taking a loan or deciding to give a guarantee to someone, it is worth reading about it on the Internet, for example on the website of loan companies. If we know when to disagree with the loan guarantee, we will be able to manage the household budget more efficiently and effectively and we will not be exposed to negative legal consequences or indebtedness.
How to protect yourself as a guarantor?
First, let’s negotiate the loan amount for which we are responsible. In many cases, you can get along and negotiate, e.g. liability up to the amount of borrowed capital without interest. It is worth negotiating the duration of the surety – e.g. a few months. After the deadline, you can be released from liability. Let’s set up an information system in the event of cessation of repayment, which will allow us to react and prevent interest being charged for delay. We, as guarantors – co-responsible for incurring debt, must know when something bad is happening with the loan repayment.
Let us remember that being a resident is an important decision that can have serious consequences and should be thought through carefully. Despite good intentions, you should not be guided by emotions here, but act carefully and thoughtfully.