Loan with guarantor – What are the advantages and disadvantages

Tight financial scope, which a borrower can only counter with additional collateral for the bank. The loan with a guarantor is one way of creating this security. The contribution deals with the advantages and disadvantages of the guarantee. Alternatives are also pointed out.

The loan with guarantor – advantages and disadvantages

The loan with guarantor - advantages and disadvantages

The main advantage of a guarantor loan is with the lender. It is the additional security of his investment through the guarantee. Instead of just one person, two people are now liable for the entire loan, independently of one another. The surety’s liability extends to possible additional costs for coercive measures. But not only the lender, but also the borrower can benefit from the guarantee. Higher loan amounts than they could actually be financed with their own creditworthiness enables the guarantor to assume liability. In addition, a small interest advantage can jump out for him due to the additional security.

A borrower only has disadvantages in terms of moral responsibility towards its guarantor. The only disadvantage is the guarantor. Without having the slightest benefit from the loan, he is fully liable. He has no entitlement to part of the loan amount or influence on its use. A guarantee should only be given to someone who is aware of the risk. He should also have sufficient funds to pay off the loan if necessary.

Alternatives to guarantees.

Alternatives to guarantees.

The best way to avoid a guarantee is to change providers. Not all credit institutions only grant loans with guarantors. Additional collateral is often not required. The lenders set their own rules within the legal framework. What exactly these regulations look like is the business policy of the respective institute and is not always publicly understandable.

Real assets can also be used in place of a guarantor to secure the loan. Some institutes prefer the vehicle-Brief as credit protection, others prefer a capital-building life insurance. Another good alternative to sureties is that offered by private loans. Private investors rarely require a guarantee. Different rules apply to lending to them. Security is welcome, but first and foremost they want to be able to trust. If you can build this trust, you can also avoid the loan with guarantors and refinance yourself privately.

Credit for young people – what do you need to consider

Young people who start an apprenticeship start an independent life. You get money for the first time and just want to get started. But getting started can be over quickly, because now the trainees recognize how expensive life really is.

Those who still live at home have many advantages. There is no rent to pay and the cost of the groceries is also not very high. The situation is different for those who want to move into their own apartment. The rent, the electricity and the telephone bill have to be paid alone. Big leaps cannot be made, like getting a driver’s license or buying the first car. Many then want to take out a loan for young people.

What needs to be considered when it comes to young people’s loans?

What needs to be considered when it comes to young people

Many banks offer a loan for young people, but this is always subject to conditions. If the applicant is not of legal age, he always needs the signature of the parents to borrow. If they refuse to sign the contract, no bank will grant a loan. If you agree, the trainee must submit various documents. This primarily includes the training contract.

If the trainee is still working during the trial period, it will be difficult because the employment relationship can be ended at any time. A loan can always be granted after the trial period. In addition, the Credit Bureau is checked. All cell phone contracts and lending are in there, so that this decides on the creditworthiness. If there are too many entries, the creditworthiness is downgraded and rejection can occur. If the Credit Bureau is clean, the bank usually grants a loan.

Conditions of the bank

Conditions of the bank

In the case of a loan for young people, contracts are awarded whose duration is not longer than the training period. So the loan must be repaid during this time. If the trainee already has an employment contract that guarantees that he will be taken on after the training, the duration can be extended. The contracts are small loans. These have a maximum loan amount of EUR 2,000 so that the borrower does not become heavily in debt at a young age.

The monthly installments are always based on the training salary so that the installments can also be repaid. If the loan application is accepted, the loan amount is transferred to the existing checking account. This process usually takes up to a week. The driver’s license, rent or other bills can then be paid with the loan.