If loan contracts are concluded, the borrower is usually required to provide collateral for this. With these collateral, the bank wants to minimize the risk that a change in the financial situation of the debtor will lead to a default on the loan. In the case of construction finance, the registration of land charges has generally prevailed as security. However, if the value of the property is not sufficient or if the loan is used for other purposes, such as opening a business, the suretyship can be used as additional security. A guarantee is provided by a person who then, in the event of the borrower’s insolvency, vouches for his obligations towards the bank.
Loan with a guarantor
The most frequently used guarantee in Germany is the jointly liable maximum guarantee. In this form, the guarantor waives the so-called objection of advance action. The bank can thus contact the guarantors as soon as the borrower is in arrears with even a single installment. In order not to have to pay for all of the borrower’s liabilities, the guarantee is limited by specifying the respective loans for which the guarantor is liable. In this case, however, it applies indefinitely. In order to protect the guarantor, who in some cases only has such a contract out of financial ruin because of emotional attachment to the borrower (example: guarantee of the parents for their child, guarantee of the spouse) Today, the conditions must be met for the guarantee to be accepted and to become final.
The perfect credit rating of a guarantor
One of the most important requirements is that the guarantor has a perfect credit rating. As with the borrower, this is checked on the basis of self-disclosure, proof of salary and tax assessments. If the guarantor is independent, the bank’s balance sheets and business evaluations must continue to be submitted. On the basis of these documents, the solvency of the guarantor is to be determined and checked whether, in the worst case, the guarantor can pay the credit installments out of his income. If this is not the case, the guarantee cannot be accepted. Furthermore, the guarantor also checks the Credit Bureau data; this requires consent to the Credit Bureau clause. The payment behavior is to be assessed on the basis of this data.
If there are negative entries, for example from a loan that has already been canceled, the guarantee must also be rejected here. In order to be able to sign a surety agreement at all, the guarantor must still be fully operational. For natural persons, this means, for example, that they must be over the age of 18. The signing of the guarantor takes place at the bank on a specially created form. In order to grant the guarantor, like the borrower, the right of revocation, the guarantor must sign the declaration of revocation. This authorizes him to cancel the contract in writing within two weeks after signature, without stating reasons.