- We tell you what it means to be a guarantor and what you commit when you offer your endorsement
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The guarantor is that a person or entity that is offered as a guarantee of payment in case the holder of a loan can not face his debts. It is, therefore, one of the most common figures involved in the granting of large amounts of money by a bank to an individual or company.
When granting a mortgage loan for a significant amount of money, the entity offering the financing needs all the possible guarantees that it will be able to recover its money and the previously agreed interest. Hence, when granting a mortgage, the person endorsing the applicant must demonstrate the same economic and financial solvency that who will receive the money and will be forced to return it.
What do you commit as a guarantor
As a guarantor, in case of default by the loan holder, you will respond with all your present and future assets until the outstanding debt is paid. However, in order for this situation to occur, a process is required in which, first, the capacity of the loan holder to pay, both with his salary or income and with his patrimony, must be demonstrated. It will be then when the guarantor passes to assume the payment of the monthly installments of the loan, along with the interest of delay that possibly has been generated by the delay in the payment on the part of the holder.
The guarantor will, therefore, have the same payment obligations and legal consequences in case of non-payment, which could result in the seizure of the salary or even the real estate of the guarantor. Although this extreme, it is convenient to clarify it, is very infrequent.
In addition, there are different ways to guarantee a loan and some of them only contemplate a partial responsibility for payment- small business loans the 10 best options in one place Payday Now; This way, the amount of money that the guarantor will have to pay back, if applicable, is limited to an amount that would not be the total debt.
On the other hand, regardless of the responsibility for payment, the guarantor must take into account that this debt, although it is not his, will make him appear in the Risk Information Center of the Bank of Spain (CIRBE). This database records the loans, credits, and guarantees that the different credit entities maintain with their clients. It is important not to confuse the CIRBE with the lists of defaulters, something completely different. Therefore, by appearing as guarantors, our ability to obtain a loan or credit for ourselves is reduced, since the possibility of having to pay another debt depends on us.
Who can be a guarantor
In summary, the guarantor of any bank loan is required the same ability to pay that who is granted the money. This entails a series of requirements that we review below:
- Having stable and sufficient income: be it a payroll, a pension or any other source of money, the guarantor must show that he has the capacity to face the payment of the monthly installments of the loan, should the case arise.
- Few or no outstanding debt: in order for the bank to accept the proposed guarantor for the one requesting the loan, it should not have any outstanding debt, such as a loan of its own or a mortgage.
- Sufficient patrimonial level: one of the most interesting characteristics in order to be a guarantor is to have real estate free of charges, that is, already fully paid. This provides an additional guarantee that, if all else fails, the guarantor can respond to the debt with its own assets.
- Finally, for very clear reasons, a guarantor must be of legal age.
As the last point, it is worth adding that accepting to be a guarantor of any loan is a very important step that will link the guarantor, debtor, and bank throughout the life of the loan, with all the repercussions that we have already reviewed. Therefore, the guarantor should also be very clear about the conditions of the loan and if he is willing to assume them as his own if necessary.