Doing favors for your loved ones builds mutual relationships. We want and often help family members and friends, but should we always support them? The situation in which we will be asked to guarantee the loan is particularly difficult to decide. You should not always agree to this.
What is a loan guarantee?
A surety for a loan, just like a surety for a cash loan, is a commitment of the borrower to the creditor to pay the debt. There is such a necessity if the creditor was unable to do so. Therefore, not only the lender and borrower should be mentioned in the surety agreement. The borrower must also indicate the name of the guarantor, also known as the guarantor. At the time of signing the contract, he becomes a joint and several debtor.
We can meet with the loan guarantee offer, for example, at Rapida Money. The lender’s credit history does not matter to the lender. Even if we were not reliable borrowers in the past, we can apply. The road to obtaining additional funds from non-bank institutions is not closed for us. We have a chance to apply for up to PLN 25,000, which we will receive within 24 hours. The basic requirement is having a guarantor. We don’t have to worry about hidden costs, and all details about the proposed product can be found on the lender’s website.
Is the guarantor responsible for all the debt?
Together with the loan guarantee, the guarantor accepts the resulting consequences. What does it mean? He is forced to cover payments that the borrower has not made due to the deterioration of his financial situation. Is the guarantor responsible for all the debt? It all depends on the initial arrangements. The surety can be established only for a part of the debt or for its specific value. The decision is made at the beginning of the loan application with the guarantor. The borrower, in consultation with the guarantor established in the contract, specifies for what amount he will be responsible.
Importantly, we can limit not only the amount of financial arrears, but also the duration of the surety. When the set deadline expires, the guarantor will cease to be responsible for the borrower’s debt. This is a great opportunity for people who have been asked for a guarantee, but they are not sure whether they will be able to keep their promise in the distant future.
But should we agree to do such a favor at all? This is certainly not recommended in every situation. Surety can affect our creditworthiness, so you should think carefully about every decision that concerns our finances.
Loan surety and creditworthiness
Loan surety is not always advisable. Especially when we are planning to apply for additional funds soon. Why should we refuse? Being a resident burdens us as much as a standard credit or loan. As long as the commitment we guarantee is not repaid, our creditworthiness will be lower. We can easily estimate it using free calculators available on many websites.
After calculating the borrowing capacity, we will know how non-bank institutions perceive our financial standing. If we see ourselves that we receive too little income compared to expenses, it will be better to wait with the loan. All the more so when we guarantee someone’s commitment and our finances are additionally burdened by this. In this case, we should not be surprised that the lender rejected our application. Re-applying for a loan will make sense only when the guaranteed commitment is settled. It may turn out that we will lose a lot of valuable time, and we wanted to start renovation or replace the washing machine, which too often refuses to cooperate.
Financial plans and loan surety
We should not guarantee a loan if we suspect that the person who is asking us is a high-risk customer. In fact, we can never be sure that the borrower will pay off his debt. He may be our best friend, but when he runs into financial trouble, mutual relationships break down day by day. In a situation where money is involved, friendship goes to the background. The borrower will not be able to settle the liability, and the guarantor – although he decided to guarantee the loan, did not think that he would be forced to pay it back. This situation raises many complications, so it’s better not to let it happen.
When does the loan guarantor have to pay back the debt?
Therefore, we should not remain a guarantor and pay no attention to various circumstances. Relationships between loved ones are very important, but you can’t always put them first. Especially when we plan to obtain additional funds ourselves and we are already checking what elements the loan agreement should consist of so that it does not raise our doubts. Being forced to repay someone else’s debt, our plans will go to the background.
As guarantors, we are responsible for debt when the debtor is late paying the benefit. The creditor should inform us about this fact, otherwise he will be liable for damage to the guarantor, in accordance with the provisions of the Civil Code. When we receive a message about the borrower’s delay, the only way out for us – allowing us to ensure our own payment credibility – is timely repayment. Otherwise, we will get into debt ourselves and lose the opportunity to apply for additional funds.
Guaranteeing and educating
When borrowing, it’s worth using payday rankings and hints given to us by websites. There we will find many tips and very attractive online loans. We also need to have appropriate knowledge to guarantee. Otherwise, we may face many complications that will make it difficult for us to manage our own budget in the future. Knowing when to disagree on a loan guarantee, we will be able to make informed decisions and make sound financial choices.