Each bank is interested in maximizing the risk of non-repayment of issued funds when approving a loan. Of course, in order for borrowers to be interested in this, the bank may offer lower rates and other most favorable lending conditions.
As a rule, as a guarantee of security, the lender may require collateral in the form of collateral (usually during a large loan), or a guarantor. Most agree to the latter option, because they believe that this is just a formality that needs to be introduced into the document. But in reality this is not at all true. The responsibility of the guarantor and the debtor, as a general rule, is joint and several. And if the main borrower is unable to fulfill his obligations, this obligation passes to the person who voluntarily agreed to be responsible for it under the terms of the contract.
Who is the guarantor?
A surety can be both an individual and a legal entity, which is officially responsible for the fulfillment of obligations under the loan agreement with the borrower. A legally legal agreement is drawn up between the persons and the creditor. The liability of the guarantor of the loan begins to operate from the date that was agreed in the contract. A person who has decided to act in the interests of the borrower must clearly understand that in case of force majeure circumstances, when the borrower cannot pay the debt, he will have to pay off the loan and interest. 
Surety: Surety's Responsibility
There are two types:
- Joint type. This is the responsibility of the guarantor, in which he must fulfill all the conditions of the loan agreement exactly to the same extent as the borrower. If at least minimal arrears are formed, the second person must pay the debt;
- Subsidiary type. It arises only if the borrower’s inability to fulfill its obligations under the loan agreement is officially recognized. In this case, the surety must either take over the entire responsibility, or help with paying the debt.
Loan payment
The most common form when applying for loan obligations is a joint type of liability. If payment problems arise, the borrower does not make monthly payments, or provides only partial repayment, then the surety is obliged to pay the debt instead of the borrower. Guarantor's subsidiary liability is extremely rare. It is important to understand that a person equally with the borrower must pay monthly payments, taking into account the accrued penalties and forfeits. In banking practice, it often happens when several guarantors are listed under one loan agreement at once. Regardless of the quantity, all of them are liable for the performance of the contract to the creditor. In any case, before signing the contract, the person must clearly understand the responsibility of the guarantor for this transaction. Forewarned is forearmed.
Can a guarantor lose its reputation?
Since the surety is also responsible for payment under the loan agreement, it is a mistake to believe that his reputation is in complete safety, even if he is not related to the money drawn up on the loan. Any delay or other irregularities will also be displayed in his credit history.If the borrower for some reason does not pay the loan, then due to this condition the guarantor’s credit rating will also be lowered, therefore, in the future, if he decides to get a loan and receive the most favorable offer from the bank, he may be refused. It is important to note that in the future the bank will not take into account the fact that the credit history of the former guarantor was damaged due to the negligence of another person.
Possible refusal to obtain a loan in other credit organizations
If an individual loan offer is issued by a banking organization, the existing payments under other agreements of the borrower, as well as possible payments and the guarantor's liability under other agreements, are mandatory. The maximum loan amount that the borrower can get will be formed minus the amount that he already pays at other banks.
Each potential guarantor must understand that until his existing obligations are repaid, it is likely that he will not be able to get a loan for his personal needs.
Can the fulfillment of obligations be avoided?
The Civil Code of the Russian Federation states that the surety is obliged to fulfill its obligations only for the period specified in the contract. However, each system has its own nuances that can play a guarantee for the hand:
- As a rule, a certain term does not exist in a guarantee agreement. According to generally accepted rules, the term for the fulfillment of obligations of the guarantor comes to an end if the creditor bank does not file a lawsuit with the court within a year from the last payment.
- The contract does not spell out clear terms for payment periods. The surety has the right to terminate its obligations if, within two years, the creditor bank has not filed a lawsuit in court from the moment of mutual signing of the contract.
It is important to note that even if a decision has been made by a court, it also has a validity period. Sheets of enforcement proceedings are also valid for three years, and later cannot be presented. There is another situation where the borrower, in agreement with the bank, can rewrite loan obligations to another person with his consent. In the event that the surety does not approve of such actions, he has every right to refuse to fulfill his obligations and to be the guarantor of another borrower.
If such a situation has occurred, it is logical that the bank will try to impose its conditions on the guarantor. He may ask you to sign some documents, posing as pure formality, but it is not recommended to agree to such a maneuver, since in the case of a trial it will be very difficult to prove anything.
If there is no income
The surety is liable in any case, even if it does not have regular earnings. Another thing is that during the execution of the contract such a person may not miss the bank. But if there was income at the time of the transaction, and after the person lost his job, you still have to pay off the debt. When a situation arises that neither the borrower nor the guarantor is able to fulfill loan obligations, the bank prepares a claim and sends it to the court. Most often, the bank requires repaying the entire loan amount, taking into account interest at a time. After the decision comes into force, the bailiffs analyze the available income from both persons, and also have all the authority to seize the property of the borrower and guarantor until the debt is fully paid off.
Quite often there is a practice where a borrower or guarantor registers movable and immovable property with loved ones, so that in the future bailiffs will not be able to collect debt. After all, officially he has no financial income and property that can be seized. In any case, the guarantor’s liability will not be canceled.
Can I get a refund?
As a rule, the borrower and the guarantor make every effort to avoid troubles with the bank. If the first person has unforeseen circumstances and for some time he cannot make monthly payments, then this is the guarantee. Most often, the latter raises the question: is it possible to return the money spent? The surety has the right to demand compensation for financial damage in connection with the payment of a loan, or at least for compensation of interest on a loan.
As practice shows, in most cases close friends or relatives ask to play this role, therefore it is often inconvenient to prove your rights or demand money through the court. Therefore, before taking responsibility for a guarantor under a loan agreement, it is worth considering whether it is really worth it. After all, most often after applying for a loan and paying out, relations between people become not as favorable as they were before.
After the guarantee agreement is signed, it will be impossible to refuse to fulfill it. It is recommended that you carefully familiarize yourself with all the necessary conditions and requirements in advance so that if a dispute arises, the party to the transaction could prove its case. It is extremely important to agree in advance with a potential borrower who has asked for help and participation in this procedure.
How to protect yourself?
If a person assumes the responsibility of a surety, he must also take care of his guarantees. And although most people are embarrassed to demand a documented promise to pay a loan in order to protect themselves, it is simply necessary to resort to such measures. It is recommended to visit a notary public and draw up an official document in which the borrower agrees to fulfill his obligations, and if the guarantor has to spend his money, the borrower must compensate them for a certain period of time. Thus, if a lawsuit is filed in court, or after the fulfillment of credit obligations, the borrower refuses to return the money spent, the receipt will be the main reason for the return of money in court.