A limited credit rating, an unstable professional activity, too little income or other influences can become problematic at the latest when you need a loan quickly. As a sole applicant, you have already been rejected several times and told that you do not meet the prerequisite for a loan? You cannot mobilize a co-applicant and you do not have tangible assets to secure the sum. Your last chance is a loan with guarantors, as recommended by the bank.
For borrowers with a bad Schufa and other credit rating restricting "characteristics" a guarantor is an opportunity. Nevertheless, you should carefully weigh the risks and consider whether the loan with guarantors is really the only and last solution. You enjoy some advantages, but for the guarantor himself this decision is only risk without consideration. This means that the friendship, the family relationship or the business partnership is put to a hard test and permanently disturbed at the latest in the "worst case".
What is the function of the guarantor?
The aim of a guarantor is to reduce the risk of default of the borrower and in this respect to be liable with his own finances. A guarantor fulfills the function of balancing the creditworthiness of the borrower and providing the bank with security over his own creditworthiness. Practically, the guarantor performs the same function as a term life insurance or a mortgage. Only that a loan with guarantor is a financial service in which a person is liable for the loan repayment of the actual applicant with his money and his guarantee. Guarantors take a high financial risk without themselves gaining any advantage from their willingness to be liable for your financial reliability. The only one who benefits from a loan with guarantor is the bank.
For whom a loan with guarantor is suitable?
Do you achieve only a low income, are in the Schufa, are self-employed or freelance work? Then a loan with guarantors can be an option. If you are not able to secure a loan on your own, because you do not have tangible assets or capital-forming insurances, the guarantee fulfills the prerequisite that a bank places on the granting of the loan. Every consumer who is classified as a high risk by the banks due to his negative Schufa, lack of collateral or a low income, or no fixed income, secures his chances with a loan with guarantor and receives the desired loan through the security that the guarantor provides. What sounds optimal at first sight, should not be underestimated in the effects. While the borrower and the bank benefit, guarantors literally go empty-handed and only bear the risk without receiving any benefit.
Requirements and obligations of the guarantor
The obligations and requirements of a guarantor vary according to the types of guarantor. We will go into this point in detail in the next paragraph and explain to you what characteristics the different types of a guarantee bring with them and what obligations the guarantor must fulfill in each case. In general, i.e. for any loan with a guarantor, the guarantor becomes liable if you do not meet your obligations and do not reliably repay the loan. The bank does not wait long for you to claim the guarantor's obligations and charge the guarantor for the default. If you apply for a loan with guarantors or if you yourself want to take over a guarantee and become liable for a borrower, you should know the risk and be aware of the characteristics of the assumption of liability.
Different types of a guarantee
As already alluded to, there are various guarantees in the loan. Most often, the bank requires a deficiency guarantee. If the borrower does not pay and there were no attachable valuables in a foreclosure, the guarantor is liable. The guarantee is based on the assumption that the bank has made every effort to collect the outstanding debts from the original borrower. More risky, but required in the case of very poor creditworthiness and many entries in the borrower's Schufa, is the directly enforceable guarantee. Here the bank does not have to prove that the borrower can not pay his debts.
In the case of a directly enforceable loan with a guarantor, the bank is entitled to approach the guarantor directly in the event of a default and to demand the money from him/her. Those who sign a contract for guarantee on first demand as guarantors are immediately required to pay if the borrower defaults on payments. If the demand is unjustified, the payment must still be made and will be refunded if the demand proves to be unnecessary. Note that this loan with guarantor is not regulated by the Civil Code, but it is a loan where the guarantor's liability comes from the freedom of contract. The fourth possibility of a loan with a guarantor is the global guaranty. This has special characteristics and obligations of the guarantor.
Special feature of the global guarantee – very high risk for the guarantor
In the case of the three guarantees listed above for a loan with guarantors, the guarantee is requested only for the loan for which the borrower and the guarantor are signing. It is different with the global guarantee. For example, you have an installment loan of 1.The creditors applied for a loan of EUR 000 and found a guarantor because they would otherwise not have been able to obtain a loan due to their creditworthiness and the entries in the Schufa database. If you subsequently take out a car or real estate financing, this loan is also secured with the guarantor. The bank does not make it a requirement that named guarantors must re-sign and confirm their acceptance of liability in this case.
In the case of global guarantees, you are liable for every loan that is taken out following your signing for a loan with guarantor. If you have fallen out with the borrower in the meantime and want to separate from the assumption of liability, this action is very difficult, since you will not be informed by the bank about a new loan with guarantor and will still be held liable in case of non-repayment on the part of the borrower.
How and for what amount is a guarantor liable??
In general, the liability in the loan with guarantor refers to the specific loan amount including interest and effective interest rate. In order not to be financially ruined as a guarantor, you should exclude liability for additional costs and commissions, as well as carefully read the contractual details in the loan with guarantor. It is advisable if you know the data from Schufa and know specifically how much income the borrower earns and what his creditworthiness really is. If, based on the Schufa and other important factors, you are unable to identify any prerequisite for secure repayment of the debt, you should not accept a guarantee in order to protect your own financial security.
If you still want to be a guarantor, differentiate your liability by contract and, above all, exclude the possibility that you are liable for additional debts and a new loan of your "godfather" in addition to the actual loan with guarantor. You are liable with all your assets, with your real estate and also jeopardize your private pension provision if you are ultimately liable for the debts for which you have agreed to act as guarantor.
Who can be a guarantor?
Guarantees can be assumed by anyone with a better credit rating than the borrower. Since the liability for a loan is a personal and very sensitive matter, as a rule, family members, spouses or best friends, and occasionally business partners are asked for a loan with guarantors. In the case of a loan with a guarantor, you do not act as a second borrower, but you are still liable for all the lapses on the part of the borrower. For all types of guarantee, your liability will be reported to Schufa, even if the entry does not have a negative impact on your liquidity rating. As a guarantor for a loan, you provide security, the plausibility and requirements of which should be carefully weighed up in connection with the borrower's likelihood of payment. A loan with a guarantor can break up families and partnerships, friendships and entire livelihoods.