A guarantor is someone who vouches for you and undertakes to, if the user for any reason does not fulfill their obligation to continue payments.
Businessmen and citizens are becoming more difficult to make decisions to borrow. Not only are they cautious. And the other party, the banks are, before approving the loan. placing the clients under scrutiny. No wonder, because the number of loans that are in arrears is growing from month to month.
Number of people who agreed to be guarantors and came into a situation where, instead of their relatives and friends repaying loans from year to year, they have to.
Statistics also show that, due to the economic crisis, fewer people want to be guarantors.
Some banks provide the possibility that the debt prescribes a family member or friend. That family member or friend later must repay the loan instead of the client. This form of debt repayment resembles the obligations of guarantors.
Some banks have gone one step further and give customers new possibilities. The possibility that in the event of job loss, freeze the payment of war for two years. With the obligation that every three months the bank submitted evidence of employment status.
Guarantors are suing the main debtors, for which the banks had to pay the amounts that are guaranteed. Guarantors mostly obtained disputes, but in addition to being paid off someone else’s debt. To await trial costs, charges can sometimes reach the height of the credit. And if the principal debtor has no job and no assets, no court will be able to help them to collect receivables.
If it comes to that scenario where guarantor repays others’ rate, he has the ability to, said by experienced lawyers, to sue the principal debtor to offset the costs. The guarantor must account and risk. Because if the principal debtor has no property, and in the meantime, was left without a job, there is not too many ways to collect something from him. Then the most common scenario that not only has paid his debt but also wasted ran a set of judicial proceedings.
The process can take from six months to several years. The costs depend on the value of the dispute of the loan amount.
For many banks, it was important to have as much collateral, so they asked for guarantors even for housing loans. However, banks now avoid this type of security because there are fewer and fewer people who want to pay off other people’s loans and guarantee for them.
Many people do not like risk, especially financial ones. Being a guarantor is not at all a rewarding and you must make sure that the person you warrant to really be able to repay the loan. These are just some of the reasons why nobody today wants to be a guarantor.
Fortunately, fewer banks looking for guarantors and loans are generally credited directly to clients. So, if someone asks you to vouch for him, remember what consequences this may have on your financial situation.