In credit transactions, surety is quite common. The bank may require you to find someone who will vouch for you when issuing a loan. Or your best friend or close relative may ask you to vouch for him under a loan agreement. It is not always convenient to refuse such a request. But before giving your consent, it is better to know the consequences of your decision. Who is a guarantor, what responsibilities and risks does he bear, we will tell you in more detail.
What is a surety?
A surety is an obligation to repay a loan debt if the borrower fails to repay it. A surety is a person to whom the bank will make demands to fulfill obligations under the loan agreement if the borrower is unable to fulfill them for any reason.
Guarantors should not be confused with co-borrowers. A co-borrower lebanon mobile database is the same participant in the loan agreement as the main borrower (called the "title borrower"). A co-borrower is usually involved in the transaction when applying for a mortgage or a large loan. He receives the same rights and obligations under the loan agreement as the title borrower. Therefore, credit and financial institutions willingly include his earnings in the calculation of total income. Accordingly, the borrower can receive a larger amount of money as a loan.
Common example: spousesare taking out a mortgage. The husband is the title borrower in the transaction, and the wife is a co-borrower. In fact, the entire family is credited. If the husband does not have enough income to receive the requested amount, the wife's income is included in the solvency calculation.
Why involve guarantors?
In banking practice, a guarantee is required when issuing large loans. The bank may require additional security if it doubts the borrower's ability to repay the borrowed funds on time.
A surety is an additional type of security for a loan. Therefore, having such a guarantor, you can sometimes get a loan on more favorable terms:
at a lower interest rate;
for a large amount;
for a longer period.
Also, having guarantors can reduce the risk of loan denial. For example, the applicant has a bad credit history and no liquid assets that can be taken as collateral. Without additional collateral, he is unlikely to be granted a loan because the risks are too high. A solvent guarantor with a good credit history will increase the chances of approval of the loan application.