Can a guarantor have a loan? Of course, a guarantor is not prohibited from applying for a loan and also taking out a loan. Another question, however, is whether banks grant a loan despite a surety. Like all prospective borrowers, a person who has previously given a guarantee will only receive a loan if the creditworthiness requirements established by the banks are met.
What influence does an existing guarantee have on the guarantor’s creditworthiness?
In order to answer this question, we have to take a close look at the obligations that a guarantor has towards its contractual partner, the creditor.
As an example, we choose a loan guarantee. The guarantor enters into a surety agreement with the credit institution, in which he undertakes to take responsibility for the borrower’s liabilities arising from the credit agreement.
- Before concluding a surety agreement, the bank checks the creditworthiness of the future guarantor in a similar way to before concluding a loan agreement.
- Guarantees can affect the guarantor’s creditworthiness, making borrowing difficult, and in rare cases even impossible.
From the point of view of the credit institution, this guarantee is a so-called personnel security for the loan taken out. If there are payment difficulties, the bank can stick to the guarantor.
The guarantor’s interests are different
The guarantor must expect to be called upon at any time without knowing whether and when this will happen. Table of contents Credit check before the guarantee contract is concluded Credit check before borrowing despite guarantee Tips for a loan despite a guarantee
If the guarantee is a joint and several guarantee, the rule for securing loans to private individuals, the bank does not even have to enforce the outstanding claim against the borrower. The bank can contact the guarantor directly.
Credit check before the guarantee contract is concluded
A guarantee is only suitable for the bank as security if the future guarantor’s creditworthiness is sufficient to be able to assume the borrower’s obligations in an emergency.
For this reason, the credit institution generally checks the guarantor’s creditworthiness very carefully. Similar to a credit request, documents must be submitted:
- A completed self-disclosure.
- A certificate of identity (copy of your identity card).
- Salary certificates or similar documents such as salary notices, income tax notices.
The future guarantor must also declare his consent to obtain information from credit record and / or other credit agencies.
Only those who can successfully pass the credit check of the lending bank can guarantee it.
Credit check before borrowing despite guarantee
If the guarantor wants to take out a loan himself later, he has to undergo a credit check again. This creditworthiness check deals on the one hand with the probability of default and on the other with the financial situation of the prospective customer. The guarantee plays a role in both cases. A guarantee is not an immediate obligation that must be fulfilled immediately. However, there is a risk that the guarantor will be able to benefit from the guarantee in the future.
If this happens, the amount of disposable income will decrease. The claims from the guarantee then compete with the claims of the credit institution from the loan agreement. Each bank will consider this fact alone as an additional risk. In addition, a guarantee can affect the score. Credit guarantees agreed with banks are reported to credit record and other credit reporting agencies and entered in their files.
Guarantees are neutral characteristics, so they are not negative entries
Something else only applies if guarantors are called upon and fail to meet their obligations under the surety agreement.But everything that credit record knows is taken into account when determining industry scores, including guarantees. It is likely that the guarantee, like pre-loans, will affect the rating. The result can be a poor score. With a future borrowing, an existing guarantee can be doubly hindering:
It can be the cause of a worse score and raise doubts at the bank as to whether the actually sufficiently freely available income actually ensures the repayment of the loan desired by the customer. Both can result in the bank not issuing the desired loan in full or at lower interest rates or refusing to grant the loan altogether. From the bank’s perspective, there are good reasons to be careful about an existing guarantee.
Guarantees are not a security that a bank requires from the outset
If the creditworthiness of a credit customer is sufficient, a transfer of salary is usually sufficient for installment loans and the assigned vehicle as security for assigned car loans. Real estate loans are secured by entering a land charge. If the home loan is granted to married couples or life partners, banks usually expect both partners to sign the loan agreement as borrowers.
A guarantee is often the last lifeline for the borrower to obtain the desired loan despite existing creditworthiness problems. In any case, this is the case in private customer business. However, if the creditworthiness of the borrower leaves something to be desired, then the danger cannot be dismissed out of hand that the guarantor must ultimately be responsible for the borrower’s liabilities.
Tips for a loan despite a guarantee
In principle, guarantors cannot terminate a guarantee contract. So there is practically no way to get rid of the guarantee before borrowing. It is not that every guarantee makes borrowing impossible right from the start. It depends on the individual case and of course on how it looks with the guarantor’s creditworthiness and whether the creditworthiness is sufficient for the desired loan according to the guidelines of the bank despite the guarantee.
First you should make a normal loan application. However, the guarantee must not be kept secret. The bank receives knowledge of the guarantee at the latest with the credit record information. If there are problems with lending, a discussion with the bank is recommended. Under certain conditions, banks can talk to them.
House banks that have known the customer for a long time are more willing to lend in such situations than foreign direct banks
Interested parties should present the guarantee contract to the bank and demonstrate to what extent the debtor for whom they have guaranteed has always met their obligations under the loan contract on time and in full. The bank will also be interested in how much of the remaining credit remains. If the borrower has paid his installments on time in the past and the residual loan is no longer too high, the chances of a loan increase despite the guarantee.