What are the advantages and disadvantages of loans with guarantees?

For many borrowers, surety bonds are the only way to get credit from the bank at all. If there is any doubt about the ability to pay, it is often guaranties that make it possible to take out a loan. Especially for loans for freelancers or the self-employed, this can be a good choice. Often they have a regular income, but the bank is not good enough because of the higher risk.

A guarantee is additional security for the bank. The guarantor is liable for the bank if the debtor can not pay the installments. So he has to pay the borrower’s loan. A guarantee comes into play especially if the debtor can not offer enough collateral.

In the case of a default, the guarantor must pay off the loan. Therefore, both parties should take sufficient time to consider the conclusion of the loan agreement. If the guarantee actually has to be used, this will burden the relationship between the two parties involved. In addition, it should be regulated in this case how the guarantor will get his money back from the debtor. This is the only way to avoid anger and make the guarantee fair for both parties.

There is also a big difference between the deficiency guarantee and the joint and several guarantee. The deficiency guarantee is much more common. The guarantor may only be claimed if the debtor is in fact no longer able to settle the payments. Only when a foreclosure is unsuccessful, the guarantor must pay. A self-defense guarantee, on the other hand, allows the lender to make equal use of guarantors and debtors. For the guarantor, the default guarantee is the much better option.

What is a defense waiver?

What is a defense waiver?

An objection waiver means that the guarantor can not benefit from the pleadings like the debtor. Normally, all defenses, such as limitation, apply equally to debtors and guarantors. If the defense waiver is contractually stipulated, then the guarantor is also liable. The Selbstschuldnerische guarantee with objections waiver is thus the variant, which is most disadvantageous for the guarantor. At the same time, it is especially popular with banks.

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