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What is the guarantor loan – the Loans

The guarantor financing is a particular type of financing for which a creditor institution grants a loan to another subject thanks to the presence of a third figure, the guarantor, who is fully responsible for the loan and that is committed to covering any missing payments of the person that follows it.

The guarantee is officially certified during the signing of the loan contract by the guarantor’s signature, which then becomes tied up as the beneficiary of the loan. In the event that the latter does not want to be able to pay the loan reimbursement for which reason, the guarantor who has taken responsibility for it must pay the debt.

Credit institution

Credit institution

The credit institution will thus be able to make claims at its discretion not only on the debtor, but also on the guarantor, and also it will have to proceed with the payment under penalty of all the negative consequences typical of situations of non-reimbursement such as payment intimations, foreclosures, registrations in the register of bad payers and so on.

Since the payment by the guarantor would affect his financial situation, it is not automatic that the institution accepts any subject as guarantor, but will first verify the financial soundness of the Central Risks and its sources of income. This is why the guarantor must be able to demonstrate, through banking systems or through a tax return, that he has an adequate income or a stable job or property, in any case of the elements for which the financial company may, in the event of the debtor’s failure to pay, claim repayment on he.

The acceptance or otherwise of a subject as guarantor, therefore, depends substantially on how much the latter could guarantee the extinction of the debt and may or may not be granted depending on the extent of the financing made, so it varies from situation to situation.

Dollar safe – 500 USD

Dollar safe - 500 USD

For example, if the payment of a used 5000 euro car is to be guaranteed and the guarantor has a one thousand euro contract per month for two years, it is very likely to be accepted. The same subject, in the absence of other present income or property, could hardly be accepted as guarantor of a loan for a twenty-year loan. Furthermore, the guarantor cannot be included in the list of Bad Payers of the Central Risk to the borrower.

The first aspect that a guarantor should worry about, however, is that the installments are paid extremely correctly by the debtor, otherwise the payment will “rise” towards him. If for some reason this hypothesis should occur, the guarantor may still proceed to retaliate against the principal debtor, as stated in the Civil Code in the articles from 1950 to 1952 and in article 2871.

The guarantor is not a mandatory role in the financial operations of any kind. However, you can propose it to the credit institution to make it easier for you to accept a loan or, conversely, it may be the credit institution that requests it if it is not safe enough to be free of risk.