You don’t just act as a guarantor for a loan. No matter how much you want to help your friend or child, it is important that you carefully consider what the guarantee means to you and how you can arrange this smartly. Especially when it comes to a large loan. In this article you can read how to guarantee works and what this means for you and the person for whom you guarantee.
Never pay too much again!
Even if someone guarantees, it is important to first make a good comparison. Do it quickly!
Guarantee – What is that?
Guaranteeing a friend or family member means that the bank recovers the installments and the guarantee if the other person can no longer pay it. Until the other person pays again, you therefore pay for the monthly installments of the loan or mortgage. Depending on the size of the loan and the period that your friend or child does not pay, these costs run high. So always calculate in advance if you can and want to bear these extra costs.
The guarantee also influences your own options for taking out a mortgage. The bank actually includes the guarantee in the calculation of a mortgage when you apply for it. You will only receive this mortgage if you can repay both the new loan and the loan for which you have a guarantee on a monthly basis.
In addition, you sometimes have to provide a collateral, often a certain amount that is on a blocked account during the guarantee. You can therefore not access this money as long as your deposit. But this does not apply to every guarantee.
Guarantee for a loan – Benefits
When your parents or a friend stand surety for your loan, you can borrow more money or you pay a lower guarantee. The bank runs less risk if someone guarantees you. The loan costs less and your borrowing capacity is slightly higher. Certainly with a starter mortgage this offers advantages. As a starter you often do not earn that much, so your maximum mortgage is lower. While you earn more over time. With a guarantee, you therefore already buy the house that you can normally only buy in a few years.
Deposit mortgage – Cons
On the other hand, you are not entitled to a National Mortgage Guarantee (NHG) if your parents stand surety for the loan, while you actually receive a discount on the Mortgage . Whether the bank also gives a discount on the Mortgage guarantee if your parents act as a guarantor, is determined by the bank itself. So ask different banks about the possibilities.
Guarantee for loan – Bail
As a parent, you are often only allowed to act as guarantor for your child mortgage, but others may also do this for other loans. If you decide to act as a guarantor for a loan, sign a contract for this: the guarantee. In this you lay down the obligations that you enter into and the obligations of your child or friend.
Cancel the deposit
You can of course cancel the guarantee at a given time. A cancellation period of a few months often applies for this. In this way, the bank prevents you from canceling the guarantee when you have to pay.