When lending money to borrowers, financial and credit institutions bear certain risks. They are due to the fact that there is always the possibility of non-repayment of the loan. Against this background, it is natural that the lender wants to be minimize risks. Guarantor loan is one of the most common ways to do this.
A loan secured by a guarantor is a type of cash loan in Massachusetts in which the guarantor partially or fully assumes the financial borrower’s obligations to the lender. By attracting a guarantor, a financial and credit institution gets guarantees of a refund.
How can I take a loan?
Guarantor – a person acting as a guarantor of the payment taken on credit. Here are the key requirements imposes on those who plan to act as a guarantor:
- legal age: 18-65;
- place of residence;
- unspoiled credit history;
- legal employment;
- confirmed solvency;
- absence of current unpaid loans and other financial obligations.
Banks and credit unions are more loyal to guarantors who have family relations with the borrower. In this case, the chances of loan approval are significantly increased. The presence of property, a managerial position, a highly paid profession in demand, and a significant social status also increase the likelihood of issuing a loan.
When you can’t do without a surety?
There are loans that are provided without a surety. These are usually small short-term loans. But there are those who do not give a refund without additional guarantees. Here are some cases in which you cannot do without a guarantor:
- Average applicant income. If a person officially earns less than is required to make monthly payments, additional guarantees will be required.
- Bad credit history of the borrower. It can be spoiled if there are even the slightest delays in loan payments, including those that have been repaid long ago.
- Large loan amount. Each financial and credit institution interprets this definition in its own way. For some it is the equivalent of $ 1,000, for others – $ 10,000.
Keep in mind that the financial sector prefers guarantors over collateral. This is due to the potential difficulties in implementing the latter. It is believed that a person who has assumed financial obligations on a loan will pay off the debt faster than the collateral is sold and all the legal subtleties are settled.
Obligations of the guarantor
The rights and obligations of the parties are clearly stated in the agreement. Particular attention should be paid to paragraphs in small print. Usually, it is there that they indicate the consequences that will occur in case of non-fulfillment of financial obligations. If for any reason, the borrower is unable to repay the loan, this responsibility falls on the shoulders of the guarantor. In this case, he must:
- pay off the loan body and interest;
- pay fines and penalties, if any;
- pay bank and legal costs if the case went to court.
If the guarantor refuses to fulfill the obligations assumed, the creditor has the right to collect the debt through the court on his own or turn to collectors for this purpose. After a court decision has been made, the debt can be collected compulsorily, including through the inventory and sale of property or withholding part of the income.
When the surety may end ahead of schedule?
The guarantee agreement implies that the mutual obligations of the signatories are terminated only after the amount of the loan and interest for its use have been paid. There are other legal grounds for terminating the surety. They are:
- upon expiration of the limitation period, if such was specified in the agreement. It is relevant if, within a year after the date specified in the agreement, the creditor has not submitted legal requirements to pay the existing debt.
- if the lender refuses to accept the duties proposed by the surety or borrower. This happens when the lender wants to change the terms of the agreement.
- when the debt is transferred to another person. This can happen without the guarantor’s consent, but only if the borrower and the lender have agreed on this issue between themselves.
When the payments’ amount on the loan increases without the guarantor’s consent. This happens when the interest rate is unilaterally revised by the lender or the loan amount is increased.