A cash loan is a loan of any purpose, exclusively granted by banking institutions, mainly banks and cooperative savings and credit unions.
Most often, a cash loan is an unsecured loan, although if the bank has doubts about the creditworthiness or creditworthiness of the customer or if the bank wants to take out a high cash loan, the institution may request collateral. It can be a surety. What is it and what is the offer for a cash loan with a guarantor?
A surety is a structure that guarantees a future event. Basically, it is an agreement whereby the guarantor undertakes to the creditor to perform the obligation if the debtor did not. This is in accordance with art. 876 of the Civil Code. The parties to the surety are the guarantor and creditor who has entered into an agreement with the debtor.
Therefore, the debtor will not be a party to the surety agreement and does not have to consent to the conclusion of the surety agreement or know about it. Any civil law entities, i.e. both natural and legal persons, can be the guarantor.
The guarantor’s declaration should be made in writing or otherwise it is null and void. In the event of a surety for the debt of a person who could not commit due to a lack of legal capacity, the guarantor is obliged to perform the service as the main debtor, if at the time of the surety about the lack of this capacity he knew or could easily find out.
Civil Code in art. 878 assumes that you can vouch for future debt to an amount that has been agreed in advance. There is also the possibility of indefinite surety for future debt, before its creation, which can be canceled at any time.
The scope of the guarantor’s obligations is determined in the same way as the scope of the obligor’s obligations. It should be emphasized that the legal act made by the debtor with the creditor after the guarantor has been granted has no right to increase the obligation of the guarantor.
When the debtor is late with the performance, the creditor shall immediately notify the guarantor of this fact. He is responsible for the debt as a joint and several debtor.
The guarantor’s liability ends when the debt is repaid by the debtor or if the creditor fails to call for payment within six months from the date of the guarantee and the date on which the request arose.
Credit repayment collateral
The conclusion of the loan agreement gives the debtor the obligation to meet the obligation in accordance with the agreement. The guarantee of its implementation is the debtor’s assets, but it may turn out that over time the debtor will become insolvent and his assets are not enough to cover the debt.
A creditor, for example a bank providing a cash loan, should care about ensuring the best possible repayment of debt, which can be helped by many different collateral.
A surety may be accepted by banks as collateral for the repayment of credit obligations. Thanks to it, the bank reduces its credit risk when granting cash loans to clients.
Even if he did not repay the loan by the end of the loan or if he defaults or is late with the repayment of the liability, the guarantor enters the position of the borrower and must repay principal and interest installments.
An important function of the guarantor when taking out a cash loan is that it can increase the borrower’s creditworthiness. When choosing a guarantor, you must pay attention to whether the person has a permanent source of income, is employed (preferably on a permanent employment contract), or runs his own business for a sufficient period of time, etc. Before signing the contract, the bank will check the creditworthiness of the guarantor.
Taking out a cash loan with a guarantor in practice
If we want to take out a loan secured by a surety, you must sign a loan agreement, and the bank concludes a separate surety agreement with the guarantor. In both cases, written form must be maintained.