Many people who are in urgent need of a loan are aware of the difficulties in lending. The solution in many cases is the loan with guarantors. The inclusion of a guarantor brings many benefits in terms of lending, but also risks.
Comprehensive information on the advantages and disadvantages of a guarantee can be found in the article.
Why is the loan with guarantors so in demand?
The loan with guarantors offers many advantages for borrowers and even creditors. For example, a solvent guarantor provides more scope for paying interest. The bank can invest the money more secure, therefore, cheaper interest rates are possible. A guarantor also brings advantages in the utilization of possible credit sums.
Especially with larger financings are often set tight limits on the amount of funding. The additional securing of the loan amount by the guarantor also provides greater scope for the clerk in the approval procedure.
In case of financial difficulties, the guarantor is liable.
Benefits for borrowers and bank – Disadvantages of a guarantee.
Compared to the co-applicant, the guarantee is a lower level of credit protection. Although the guarantor is ultimately liable, the liability of a co-applicant is rated higher in the rating for the loan request. The lack of a say in the use of the loan and also the lack of information in case of difficulties, they are a risk for guarantors.
This risk should not be underestimated. The guarantor is ultimately fully liable for the entire loan. He is often informed only when it is already too late. Problems that could have been solved beforehand with the assumption of a rate, which can have grown unnoticed.
Unlike a co-applicant, the guarantor does not have easy access to the original purchase in the event of an emergency. He has to “stand behind” like all other creditors.
A guarantee is a vote of confidence.
The reasons to want to take on a guarantee can be multi-layered. The most important consideration in deciding should be trust in the person being vouched for. However, the safety of the installment should not be disregarded for approval of the loan with guarantor. If the guarantor has doubts here, then it is better to reject the guarantee.
There is always an alternative that a borrower can use to provide security to the bank. Self-protection should, in case of doubt, take precedence over friendship and kinship ties. In the end, everyone has to think first about their own safety. If the guarantor is really aware of his risk and also sure that he will not be liable, then the loan with guarantors is a good decision for all concerned.