According to statistics, every tenth resident is responsible for paying off financial obligations incurred by another person.
The persons who have taken out the guarantee are called (or guarantors ). A surety is one of the most effective forms of crediting the borrower or borrower in the eyes of the institution granting him the commitment and one of the easiest methods of securing debt repayment.
The bank (or other financial institution) often asks for a guarantor or several guarantors if the potential borrower has a negative credit history or has no entries in the Credit Information Bureau. The resident then – with his own name, surname, and property – confirms the possibility of repayment of the financial obligation incurred by another person.
What does the law say about the surety?
Issues related to the surety are regulated by the Civil Code. According to it, the resident – by signing the relevant contract in writing – undertakes to perform the obligation to the creditor if it is not met by the debtor. The contract is valid even if it turns out that the debtor does not have legal capacity, which the guarantor knew or could easily have acquired. Then, however, the guarantor becomes the main debtor.
Importantly, the scope of the guarantor’s liability is determined by the extent of the debtor’s liability. If, after signing the surety agreement, the debtor performs further legal actions with the creditor.
By law, the guarantor is considered a joint and several joint debtors, so he is jointly and severally liable for the debts incurred. Even in the event of the debtor’s death, the resident will not be able to rely on the limitation of the heir’s liability under the law of succession – his obligation will be to settle his obligations.
A surety in practice
Pursuant to the law, the guarantor may have an insight into both the history of repayment of the debt and may require from the creditor any information on the state of repayment of the loan or loan. In the event of non-payment or late payment, he should immediately receive adequate information from the creditor.
Several important issues can be regulated by the surety agreement itself. The commitment of the grant cannot go beyond the scope of the main obligation but may be limited to him. The agreement stipulates that we take responsibility only for part of the loan or only for the amount borrowed, without taking into account interest or additional charges.
You should also indicate precisely the period during which we take responsibility for the resulting debt. The contract should also contain a provision that the creditor should, first of all, use all possibilities of enforcing liabilities from the debtor – e.g. by establishing a mortgage on his property or attachment of assets – then the burden of obligations which will fall on the grant will be limited. It is also necessary to provide for immediate information on payment arrears – the guarantor will be able to take action to settle the debt faster.
At the same time, it’s worth trying not to be the only guarantor – the loan repayment will then be divided into several people, although the bank will be able to apply to only one of them. In practice, it happens that the debtor who has regained liquidity still does not pay its debts, because its resident is in a better financial position.
What is worth paying attention to?
A resident should look at his own credit. Before the contract is signed, it will be checked for creditworthiness – the creditor will want to be sure that the debts will be paid off. Therefore, the bank will require the guarantor to provide information on income and current liabilities.
The surety of someone’s loan is also recorded in the Credit Information Bureau, and the creditworthiness of the giraffe decreases, as we are jointly responsible for the potential repayment of the resulting obligation. This can make it very difficult to take your own loan.