The realities of life are such that people increasingly have to resort to the services of the bank when purchasing goods, real estate, cars. Banks, not wanting to incur financial losses, protect themselves from possible risks. To do this, they collect detailed data on the applicant for a loan and in some cases, an additional contract for collateral or a guarantee. In the second case, you will need a person who agrees to become a financial guarantor for the loan.
Who Can Become a Guarantor for the Loan Borrower
The guarantor is a person who assumes all obligations to the bank in case of non-payment of contributions by the debtor on the loan. Practically, the guarantor, signing the contract, accepts the lender’s requirements and bears the same responsibility for the fulfillment of the loan agreement terms as the borrower. Responsibility comes from the moment of signing the transaction document, which is confirmed by the law of the Philippines.
There is a notion of a property guarantor, who is often one of relatives of the debtor on a loan, with whom he has joint property. In this case, there comes a partial liability under the loan agreement. Usually, a partial guarantee is issued when the bank decides that the financial position of the client allows servicing the loan, but it does not have the necessary collateral.
Requirements to the Possible Guarantor
Getting a loan under the guarantor is not difficult. It is more difficult to find someone who agrees to take on such responsibility and will at the same time meet certain requirements, namely:
- compliance with age category – over 21 years old, but younger than 65;
- Filipino citizenship;
- registration of residence in the same region with the creditor bank;
- the presence of income is not lower than that of the borrower.
The applicant for the role of loan guarantor by the borrower must also prepare the necessary and very serious package of documents. Here is a list of required documents:
- certificate of income;
- income statement;
- document of title to real estate;
- certificates of deposits or other bank accounts;
- certificate of the absence of mental illness.
Consequences for the Financial Guarantor if the Debtor Defaults
Responsibility for compliance with the loan agreement for the guarantor can be either complete or partial, but more often banks resort to the first type in order to exclude all possible risks. Agreeing to guarantee the loan, a person must carefully weigh the entire measure of the obligations assumed, which make the debtor and guarantor joint and several respondents to a banking institution. To do this, you need to take into account the following.
Joint liability involves the presentation of claims by the creditor to all debtors jointly and separately to each, which means the right of the bank to demand payment of the arrears from the guarantor. A person who has guaranteed the fulfillment of credit obligations of the credited person is responsible for paying the principal debt, interest rates and penalties, as well as for compensation of other possible losses stipulated by the contract.