How often do people who decide to take out a loan need a guarantor? Often you have to enlist the support of a person who confirms the level of income and agrees to bear responsibility if the borrower has problems with repayments on the loan. Many financial institutions agree to issue a large amount in cash only if the client brings several guarantors. However, not everyone is ready to take responsibility. It would be much simpler if the surety were not obliged to the bank by anything.
Before agreeing to a deal with the bank as a guarantor, it is worth clarifying all the nuances.
It's important to know
There is such a thing as liability for a loan guarantee. What's the point? If the borrower does not cope with its debt obligations, they fall on the shoulders of the guarantor. That is, by agreeing to this kind of transaction, the client agrees to give the bank the full amount of the loan. It is no coincidence that relatives and close friends often act as guarantors. These people are sure that the borrower will cope with its obligations and there will be no problems with the financial institution. However, the situations are different.
In general, there may be several guarantors. And everyone is equal in their responsibilities to the bank. When signing an agreement with a financial institution, it is worthwhile to clarify the nuances in advance. It’s worth agreeing only on completely “transparent” conditions.
Analyze the situation
It is highly recommended that you analyze all degrees of risk when taking a loan guarantee. It is necessary to clearly assess the capabilities of the borrower. Agreeing on a deal only through friendship is not worth it. The first thing that requires a loan guarantee is liability. How to avoid her? It is quite difficult to answer the question. If a person has signed an agreement with a bank, he must follow its conditions.
Often there are times when a person begins to pursue for a loan that he did not take. As a result, it turns out that several years ago I had to be a guarantor of a neighbor or relative.
What is worth considering?
Each loan guarantor wants to avoid liability, even if the chance that the borrower does not pay his loan is negligible. Therefore, before agreeing to the trail, it is worth exploring the main nuances:
- The solvency of the borrower is the first thing you should pay attention to. After all, a guarantee on a loan is a responsibility. How to avoid it if you yourself had to sign a contract with a bank?
- It is worth considering the character traits of the borrower. Such indicators as discipline, reliability, pedantry are very important.
- Previously, you should find out everything about the loan guarantee: responsibility, how to avoid it, under what conditions it will be possible to withdraw from the contract, etc.
- It is recommended that the future guarantor check the borrower's credit history.
- It should be clarified why a loan is needed, where the money will be spent. A person who acts as a guarantor of a transaction has the right to know everything about it.
- If there is the slightest doubt, the transaction should be completely abandoned.
Compliance with simple rules will help to save your nerves and financial savings. The guarantor can only become if there is complete confidence in the borrower.
On a note!
In addition, the guarantor needs to understand whether he will be able to pay a loan for the borrower if something happens. It is worth noting that low-income people cannot become a guarantor of a transaction with a bank. A financial institution only agrees with those guarantors who can actually repay the debt in case of problems. However, no one wants to pay money for another person. How can a loan guarantor avoid possible problems? The only way is to agree only to win-win deals.
There is another nuance to which you should pay attention. Financial institutions often look at the credit history of a client who wants to become a guarantor. In addition, the person who is responsible for other people's debt loses the chance to use the services of the bank. It is not always possible to get a loan to the person who already acts as a guarantor for someone.
How to find a way out if the borrower does not cope with obligations?
If an unpleasant situation does occur, the client does not pay the loan, and the bank turns to the guarantor, it is worthwhile to carefully examine the contract again. Experienced lawyers argue that some points can be interpreted in different ways. A loan guarantee is a liability. How to avoid it, an experienced specialist will tell you. However, the lawyer will have to pay for the services. Without loss at all, it’s unlikely that everything will be settled.
A surety can sue the bank. An ideal solution would be to draw up an additional agreement, according to which you have to repay the debt on more loyal terms.
Another option is a claim for insolvency of the guarantor. It is only necessary to submit documents confirming the lack of income. It will be possible to win a court if the guarantor cannot work due to health reasons. You will have to provide official medical certificates.
But what about the borrower?
It should be understood that the responsibility lies primarily with the client who issued the loan agreement. A surety is only a minor subject. However, many financial institutions, without waiting for payments within a few months, begin to put pressure on the guarantor, and they forget about the borrower. What to do in this situation? How to avoid the responsibility of the guarantor? All you need to do is contact the borrower. And in this situation, you can go to court. But the lawsuit will have to be filed not with a financial institution, but with a person who borrowed money.
Through the court, it will be possible to squeeze out the amount that the borrower owes to the bank from the borrower. In rare cases, responsibility is shared evenly between the parties. Such a situation is possible if the borrower for a number of reasons cannot cope fully with the debt obligations and provides certificates confirming its financial position.
When does a bank have the right to demand repayment of a loan from a guarantor?
There are a number of situations in which a financial institution is legally entitled to demand payment of a debt from a person who acts as a guarantor. However, some banks may resort to threats in other cases. Therefore, each person giving consent to a guarantee must know their rights and obligations. The list of situations in which you have to pay someone else's debt is not so great.
- The borrower stopped paying the loan and does not contact the bank.
- The borrower has become incapable of work and is physically unable to receive an income sufficient to repay the loan.
- The death of the borrower.
It is worth noting that you can still find a way out of any situation. The most difficult is the third point. But even if the person who took the loan dies, the surety can rely on life insurance. If such an agreement has been drawn up, part of the reimbursement may be used to pay the loan. But it is possible that you will also have to go to court. If a person has lost his ability to work, he will receive a pension from the state. And in this case it will be possible to count on a positive outcome. Through the court, if desired, it will be possible to achieve a restructuring of the
loan agreement. Debt payments will occur in minimal installments, based on the size of the borrower's pension.
In what situations can the guarantor challenge the decision of the bank?
If the borrower nevertheless ceased to cope with his debt obligations, how can the guarantor avoid paying the loan? First of all, it is worth analyzing situations in which the client has the right to challenge the decision of the bank. It is worth remembering that a financial institution may require payment of debt from the guarantor no later than 6 months after the borrower ceased to cope with its obligations. If more than six months have already passed, the guarantor of the transaction has the right to challenge any decisions of the bank.
There is another situation that often happens. If the borrower does not pay the debt, banks begin to demand the return of money from relatives. At the same time, it turns out that they did not know that the contract was concluded. It is important to know that the guarantee is confirmed by signature. If no documents have been certified, then there are no obligations to the bank!
The guarantor will be able to refuse loan payments if he pays alimony in an amount that exceeds 75% of his monthly income. However, the problem will have to be resolved through the courts.
The guarantor’s incapacity is also an occasion to refuse obligations to the bank. The health status of the client must be officially confirmed by a medical certificate.
How can a surety avoid responsibility for a loan? To summarize
Before signing any agreement with the bank, it is worth weighing the pros and cons. It is worth agreeing only on that transaction in which you can be sure. It is worth remembering that loan guarantee is a responsibility. And how to avoid it? First of all, it is worth learning your rights and obligations. Indeed, often the requirements of financial institutions are absolutely illegal.