When applying for a loan there are several things that we have to take into account to be able to choose the ideal option, since each loan has very different characteristics. One of these variables is the guarantee, a common element in some credits and that often raises many questions. With this post, from Cream Credit we want to clarify all the questions that have arisen about the guaranteed loans, so that you have all the necessary information before making a decision. Shall we start?
We have to know that a guarantee is a guarantee that we have to offer before the fulfillment of an economic obligation.
Thus, collateralized loans are those in which, when requesting a loan, we offer a guarantee to the lender so that the lender can be sure that the borrowed amount will be repaid. Thus, in case we cannot return the money, we will have to take care of the debt with our guarantee.
There are different ways to guarantee a loan, ready to meet them?
Types of collateral for a loan
Loans with personal guarantee
Loans with a personal guarantee are those in which we will have a person who will respond to our debt in the event that it is impossible for us to repay it. In other words, if after applying for a loan we cannot pay the debt, it will fall on our guarantee, which by signing the contract has promised to support us and settle the debt with your money or with your own property.
The guarantees have the same obligations as the holder of the loan and accept the same credit conditions. Therefore, in the event that it is also impossible for him to pay the debt, he can become garnished and appear in delinquent lists.
It is important to know that, if the guarantee is going to take over the debt, you can ask the loan applicant to return the amount you have paid. It is also convenient to keep in mind that the condition of guarantor, like that of debtor, is hereditary, so that, in the event of death of the guarantee, his heirs would endorse the loan.
Collateralized loans differ from collateralized loans in that it is neither a person nor an entity that guarantees the return of the debt, but the borrower offers an object or asset with a value similar to or greater than that of the debt. Thus, the lender will keep it in case we can not return the credit.
In other words, it consists of responding to the debt with an asset of our property. Among the most common would be the car or the house, since they have enough value to function as a guarantee. In the case of the car guarantee loan, the vehicle would be the guarantee that we would offer to the lender, and they would keep it if we did not manage to meet the debt payment. If we talk about home equity loans, our house would be the good that the lender would stay.
In these cases, the contract must specify the good that is offered as collateral and both parties, the lender and the borrower, must accept it.
In this case, it is a bank that undertakes to answer for the fulfillment of our debt before a third party in the event that we cannot do so. In the case of a loan, the bank agrees to repay the debt that we have not returned. Since being a guarantee involves a risk for the bank, normally we will have to pay commissions that will depend on the term, type and risk in order to be guaranteed by the bank. Furthermore, banks usually only endorse their own customers.
Requirements to be a guarantor of a loan
To be a guarantor of a loan, you must meet a series of requirements that guarantee the lender that the person has the ability to repay the loan in case of default. The most frequent requirements are:
First of all, to be a guarantee it is essential to be of legal age.
Having a stable source of income, for example, a payroll or a pension. This guarantees that the guarantee will be able to meet the monthly debt payments.
Patrimony: The guarantor must have fully paid patrimonial assets. This is because if the guarantee ceases to receive income or does not have the necessary liquidity to settle the debt, it will respond with its assets, that is, with the real estate free of charges available to it.
In general, a person will not be accepted by entities that grant credit if they already have any outstanding debt.
Therefore, if you are over 18 years of age, monthly income, a fully paid home and you do not have any credit, mortgage or any unpaid debt, you can guarantee a credit.
Who is the debtor or the guarantor seized first?
One of the most frequent questions that arises for anyone who requests a loan with a guarantee is whether, in the event of default by both, it will be seized. Therefore, it is important to know what exactly happens when the borrower does not pay his debt.
First, the entity that has granted the credit will thoroughly examine the financial situation of the debt holder to understand why it has failed to meet its deadlines. If they find that you have no possibility of continuing to pay because you are bankrupt, they will review the situation in which your guarantee is. If the guarantee has sufficient income and money to meet the debt, it will pay it in installments as before the guarantee. However, if it does not have the necessary liquidity.
The entity will seize the assets free of charges of the guaranteed
Guaranteed loans are safer for companies because they have the peace of mind that the loan will be repaid, either by the applicant or the guarantee. However, for us they can be at great risk, since if for whatever reason we cannot repay the debt, our guarantor may be in trouble or we may even lose the home or the car. Therefore, in general it is advisable not to request loans or credits that require a guarantee.