If you urgently need money and cannot provide sufficient creditworthiness, you usually have to take out a loan with a guarantee. A bank guarantee is usually agreed for bank loans.
A guaranteed loan is a loan that a third party guarantees – or assumes the debt obligation for – in the event that the borrower defaults. Sometimes, a guaranteed loan is guaranteed by a government agency, which will purchase the debt from the lending financial institution and take on responsibility for the loan.
The guarantor is liable either for the entire loan or up to an agreed maximum amount, which includes the commissions, accrued interest and the ancillary loan costs. Due to the great responsibility and the risk that a guarantee entails, it is usually difficult to find a guarantor even in the closest relatives.
Guarantees are often needed in special life situations
After changing jobs, employees are usually in a trial period, which can be arranged for up to six months. During this period, banks usually do not grant loans without proof of extraordinary collateral. However, anyone who can secure a loan with a guarantee from a relative or acquaintance receives a promise in many cases.
In this case, even a temporary guarantee can be agreed between the bank, borrower and surety. If the loan installments are paid on time, the guarantor is released from his liability after the trial period. However, if the borrower experiences payment difficulties during this period, the guarantee remains until the entire loan is repaid.
A loan with a guarantee can be a burden for both sides
Just as the borrower can have a moral burden in the event of a loan default in addition to the financial burden, a joint and several guarantee could also lead to restrictions for the guarantor.
The guarantee is also noted in the information without a negative feature. However, if the guarantor wants to take out a loan himself, his limited credit rating is taken into account. This can be noticeable when you borrow money with interest premiums, since the guarantee is included in the credit rating.
In the event of unemployment, a surety is also futile
The banks do not consider unemployment benefits to be regular income. It is only available to finance living expenses. In these cases, therefore, a loan is not approved even with a guarantee.