What is Guarantor?



The guarantor is an agreement where a private person or a legal person undertakes to pay a debt for someone else if it cannot pay for itself. The person who goes to the castle, so-called guarantor, becomes liable for payment only when the lender finds that the borrower, also called the debtor, cannot pay his loan himself.

Who can become a guarantor?

Who can become a guarantor?

There are no exact rules about who can become a guarantor and not. However, it is important for the lender to make sure that the guarantor is creditworthy, that is, has a good ability to pay. For this reason, the creditor should always conduct a credit check on the intended guarantor. What is also usually taken into account when a lender values ​​a guarantor is whether the guarantor has other loans or current expenses.

Good to know before setting up as guarantor

Good to know before setting up as guarantor

Before you choose to stand as a guarantor, there are certain aspects that may be helpful to consider. One such aspect is that the guarantor carries with it great obligations. In the event that the borrower, the debtor, is not able to pay their loans himself, the guarantor must be prepared to go in and cover up all costs, both amortization and interest and the loan. Although this would mean that the bailiff had to sell his own assets.

What is also good to think about as guarantor is that the commitment remains even if the relationship with the borrower changes or ceases completely. (For example, at divorce.)

What is also of utmost importance to the guarantor is to be fully aware of the borrower’s creditworthiness, that is, the ability to pay. Therefore, it is reasonable that, as the guarantor of the guarantor, may request the borrower’s credit check. If it turns out that the borrower has payment claims or previous debts, it may be reasonable to consider an extra time before taking on the guarantor.

Another aspect to consider is that the guarantee commitment means that one’s own creditworthiness may deteriorate. This means that as a guarantor you may find it more difficult to be granted a loan of your own as long as you have the guarantee left.

Finally, it is of the utmost importance, as guarantor, to be aware that you do not have the right to terminate your guarantee commitment. However, the guarantor has the opportunity to get rid of his commitment in case the lender has a new guarantor or some other comparable security that the lender approves.

What is the difference between the creditor and the guarantor?

What is the difference between the creditor and the guarantor?

It is easy to confuse certain economic concepts that are similar. Creditors and guarantors are a good example of this. These two concepts have completely different meanings.

A guarantor is, as we mentioned above, a person who undertakes to repay a debt in cases where the borrower is unable to pay the loan himself.

A creditor, on the other hand, is the person or company that is the lender, for example a bank or a lender.