The guarantee fee

If you want to take out a loan, you must be able to show that you are able to repay it. If the credit assessment is uncertain and it continues to be the case that no secure and/or sufficient income can be guaranteed under the existing circumstances, the lender will demand appropriate collateral. Thus he can be sure that he will get his money back in case of insolvency. These securities can consist either of valuables (e.g. coin collections, etc.) or of own real estate. If there are no warranties, a guarantor may also be considered. It should be noted that in this case an additional guarantee fee is payable.

The rights and obligations of a guarantor

A guarantee is always interesting if the borrower is not 100 percent solvent. The guarantor has to fulfil certain conditions and assumes some obligations with his guarantee.
In most cases, family members are eligible for a guarantee because the borrower and the guarantor should have a special relationship of trust. The guarantor assumes great responsibility if the borrower is no longer able to meet his payment obligations.
The exact rights and obligations of the guarantor depend strongly on the individual conditions of the respective guarantee contract. These conditions mainly depend on the variants of the guarantee.

The Different Variants of a Guarantee

There are different types of guarantees, each of which can have individual consequences. In any case, a guarantee fee comes into force, which must be paid in addition to the loan.
The most common guarantees are:
– the global guarantee
– the deficiency guarantee
– the directly enforceable guarantee
– the guarantee on first demand

The global guarantee

This guarantee is particularly risky for the guarantor, because in an emergency the guarantor must not only be liable for the fixed sum, but also for all future debts of the borrower.

The cancellation fee

In the case of a default fee, the guarantor may only be requested to pay if the lender can prove that all possible legal means, including foreclosure, have been exhausted in advance and that he has not received his money. This variant is therefore the safest for the guarantor.

The directly enforceable guarantee

Here the guarantor is liable with all the obligations that the borrower also has. If the insolvency is established, the guarantor assumes the payment obligation under the same conditions as the borrower. The disadvantage of this guarantee is that the lender’s statement about the borrower’s insolvency is sufficient to take effect.

The guarantee on first demand

This variant can also take effect without judicial clarification of the real insolvency. A single delay in payment is enough to make the guarantor liable.

The guarantee fee incurred

Every guarantee requires a guarantee contract, which should be in writing. This additional work for checking the solvency of the guarantor as well as the administrative costs can of course also be paid by the lenders in the form of a guarantee fee. The amount of the guarantee fee depends on the existing credit risk. In most cases, the guarantee fee is approximately 1 to 3 percent of the desired loan amount. A guarantee fee may be claimed as a one-off or ongoing payment. A current guarantee fee is always charged for loans with a long term Duration during which the existing conditions for the guarantee are reviewed in certain periods.