The guarantor promises to pay what the principal debtor owes. You are therefore liable as guarantor for the fault of another. Guarantees are often used to secure a loan (loan guarantee). However, those who name a guarantor need to be aware of the implications. A loan guarantee is just a formality, a kind of friendship service, so to speak?

surety bond

surety bond

In the case of a guarantee, the guarantor assumes the obligation to meet the lender if the borrower fails to meet his obligations. The guarantee agreement between the payee and the guarantor must be in writing in order to be valid. The guarantor agrees to pay what the joint debtor has. You as a guarantor are therefore liable for third-party liability.

Guarantees often have the purpose of securing a loan (loan guarantee). If the borrower comes in financial difficulties and can not pay more, the guarantor has to “jump in” for him. 4 Types of Guarantees: Guarantee as “Guarantor and Payer”: This form of guarantee is often used as collateral for bank loans and can be very serious for the guarantor.

Because he is liable as “undivided” joint debtor for the entire claim. In the event of late payment by the borrower, BuyNer is free to choose who will be sued first. The house bank can choose whether to sue the borrower, the guarantor or both at the same time. “Normal” guarantee: In reality, the normal guarantee has only secondary importance.

In this form of guarantee, the guarantor can only be prosecuted if the principal debtor has been reminded by the payee. A reasonable period must elapse between a payment reminder and a claim against the guarantor. Failure guarantee: The failure guarantee is the “mildest” guarantee. In the case of a deficiency guarantee, the lender must first take all reasonable measures to obtain payment from the debtor.

Deposit in divorce:

Deposit in divorce:

One year after the separation, a common security can be converted into the less burdensome failure guarantee. For consumers who are liable as guarantors or jointly and severally liable for a third party debt, there are protective provisions according to the VKG. These protective provisions are not only valid for guarantors. This also applies to co-perpetrators and guarantors, as the credit institutions have in recent years, especially with spouses, proceeded to hold the partner jointly and severally and not as a guarantor.

In this way, the case law on the invalidity of guarantees for persons without income or assets of close relatives should be avoided. The main problem in reality is that family members with no income or assets can always be convinced of a loan guarantee or joint and several liability. The court may therefore, in all circumstances, reduce or even waive the obligation of a guarantor or joint debtor if it is disproportionate to the financial strength of the guarantor or joint debtor.

If you assume the guarantor’s liability, you should explicitly limit the amount of the guarantee. In principle, you should only give guarantees up to the maximum amount that you can pay without affecting your living conditions. Also note that with a guarantee you limit your own credit rating. Please also note the guarantee contract:

It often contains “extension clauses” that allow an implicit extension of a temporary guarantee. Insist that they be deleted without replacement, otherwise a temporary guarantee can lead to unlimited liability.

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