A third person acts as a guarantor and undertakes to repay the debts to the bank if the debtor can no longer do so. The guarantor is the third person, besides the bank and the borrower, and ultimately falls outside the agreement between those two parties. In the event of non-payment, the bank can use the deposit to pay.
When does someone stand surety?
When purchasing a home, it is usually the parents who stand surety for the children. This allows the bank to grant a higher credit amount, if necessary. Guarantee is usually done in the family atmosphere and on the basis of trust. However, this does not always end well with all possible financial consequences for the guarantor.
How high can the amount of the guarantee be?
This can be a maximum of the amount of the credit agreement, plus the interest that may not exceed 50% of the principal.
A free deposit may never stand surety for an amount that I will not be able to pay back. In most cases, there is an investigation of the solvency of the guarantor.
When is the guarantee a “free guarantee”?
“Free” here means the absence of any economic benefit that the guarantor could enjoy thanks to the guarantee. When a parent guarantees the credit of one of the children, this will be a free guarantee.
There is no question of free guarantee when a manager guarantees himself for his company.
If there is any uncertainty here, the court will have to make a ruling.
When does the guarantee stop?
Its duration must be recorded in the guarantee deed. When the free guarantee has been concluded for an indefinite period, it may not last longer than 5 years.
Are there alternatives to the personal guarantee?
The third-party mortgage lender: instead of a third party providing a personal guarantee, he can also establish a mortgage on his or her property. This mortgage then serves as a guarantee for the credit.
Joint and several debtorship: this goes even further than the guarantee. Anyone who signs the credit agreement is jointly and severally liable for the payment of the credit and becomes a direct debtor.