Issue of guarantors against loans or credits by a bank

Currently, the granting of a credit policy or any type of loan by a banking entity, whether a mortgage or personal, is subject to someone with solvency for the bank that guarantees compliance with the payment obligations of the loan contract or credit policy with the provision of a guarantee.

As you will know, when applying for a mortgage loan or a credit policy, credit institutions or banks usually also require a personal guarantee (usually from relatives of the main debtor applicant) to have a better guarantee that they will charge the debt or loans, since it may be directed against the debtor’s assets, the mortgaged property, and the guarantor’s assets.

Issue of guarantors against loans or credits by a banking entity

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In addition, the bank usually requires that the guarantee be “solitary” and that the guarantor waive the benefits of “exclusion, division and order” (to which he is entitled under the provisions of the Civil Code) in order to claim him immediately without first having the principal debtor declared insolvent or having to auction the property.

But we must be careful, because the bond or guarantee is the result of a contract, and therefore of the will freely be issued by the parties, and we must be aware of its consequences when the principal debtor does not pay and the bank makes known to the guarantor or guarantors who respond with all their present and future assets of a foreign debt.

In the bond there are several relationships:

  1. That of the debtor with the creditor (which is usually a bank).
  2. The bank with the guarantor.
  3. That of the guarantor with the debtor.

The problem of claiming debt to guarantors and clauses by which their rights are waived.

The guarantee is a type of bond, that is, a guarantee in the payment, which is regulated in the Civil Code, by which one is obliged to pay or comply with a third party, in the case of not doing so, with all its goods and rights, present and future. Thus, in the case of mortgage loans, if the person receiving the loan fails to pay it back, the guarantor will be obliged to pay it instead.

In the banking field, it is common for the bank to require as a condition to grant a loan that another person guarantees or guarantees its repayment: if it considers that the guarantees presented by the borrower are not sufficient to assure him that he will be able to repay the loan, he wants there to be Another solvent person who agrees to do so in case the borrower fails.

However, we must know that the figure of the guarantor in civil law enjoys, in principle, a series of rights, such as the rights of excuse and order, by virtue of which the guarantor can demand from the creditor (in this case the bank) the realization, in the first place, of the assets of the principal debtor of the loan and, in addition, to designate which assets of that one should be the ones to be executed in case of default.

The legal regime of the bond

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Established by the Civil Code is that the creditor may only demand payment from the guarantor once he has claimed the principal debtor and no longer finds assets to be seized; that is, it can only claim the guarantor when the principal debtor becomes insolvent; This is what is called an “excuse benefit.” However, the civil regulations allow the guarantor to renounce said benefit or to be jointly and severally liable to the principal debtor, that is, to assume the debt as their own, so that the creditor can claim payment either from the borrower or the borrower. guarantor.

The division benefit, in the case of several guarantors, if the bank claims the debt from a guarantor, the latter may ask the guarantor for the part that corresponds to it, unless it has been agreed that all the guarantors will respond jointly (which also usually look at the bank clauses).

On the other hand, it is also very common for mortgage debtors, throughout the life of their loan agreement, to agree or renegotiate with the titleholders of the loan modifications without the guarantor’s consent: such as the extension of the borrowed capital, of the return period, etc.

Such modification or novation of the loan contract without the consent of the guarantor leads to the application of the extinction benefit established in the Civil Code, which provides that “the extension granted to the debtor by the creditor without the guarantor’s consent extinguishes the bond”, and, therefore, the responsibility of the guarantor ignored in the agreed novation will not be enforceable when the modification of the conditions initially agreed to affect the amount of the loan, its interest, or the term of the contract.

In practice, credit institutions demand the solidarity of the bond, so the guarantor is excluded from these rights of excuse, order, division, and therefore, may be required in payment at the same time as the principal debtor, and not in a subsidiary manner as provided by the Civil Code.

An example of such a clause would be this:

(…) “The guarantors or guarantors of this operation, by themselves and by their heirs, where appropriate, are responsible for the fulfillment of all the obligations contracted by the borrower under this contract, and the consequences of those and the latter. , relieve entity X of any obligation of notification for non-payment of the secured debtor and expressly waive the benefits of order, excuse, division and termination determined by article 1.851 of the Civil Code that could legally assist them for their condition of sureties. The guarantee regulated here will be subject to the same stipulations of the main operation, insofar as they are applicable ”.

Attention. If the bond or guarantee granted is joint and several, in accordance with the regulations of the Civil Code, the creditor (bank entity, in this case) can address either the lender or the guarantors.

Finally, we must bear in mind that the debtor responds to the fulfillment of the obligations “with all his assets, present and future”, that is, after the death of the guarantor, it will be the corresponding heirs of the deceased who assume said obligations.

Better mortgage or bond?

Better mortgage or bond?

In the case of a person who is mortgaged, the debt is guaranteed only with the mortgaged property, but with neither more nor less assets. In the second case (bond or guarantee), the guarantor guarantees the debt with all his present and future assets, that is, with his home and all the others he has or may have, which is better for the bank since it can garnish the payroll or pension without having to go to the long judicial process that the foreclosure lawsuits suppose.

In recent times we have been acquainted with numerous judicial resolutions, both at local, state and even European levels, including ex officio, which refer to the existence of abusive clauses of numerous contracts concluded with banking entities.

Recently the courts are ruling that a guarantee of this type is null and void, based on the fact that the buyer or lender and the guarantor are private, and therefore the regulations of consumers (Law of General Conditions of Contract and Consumer and User Protection Law) which considers it abusive to impose disproportionate guarantees on the consumer.

(the bank already has the guarantee of the debtor’s estate and of the estate itself), such as, for example, the judgment of 02-10-2014 of the Court of Appeal Mercantile number 1 of San Sebastián declaring the annulment of the solidarity guarantee that two parents granted in favor of their children in a mortgage-guaranteed loan, on a home that they acquired, considering the waiver of all rights that corresponded to them As guarantors

Fast loans are financial loans that are requested

It is important to remember that the annual APR does not fall below 20%, so it is preferable to evaluate other options before hiring

In the middle of January, many families consider the possibility of requesting a loan to make the payment of the multiple goods acquired at the beginning of the year more bearable. Initial estimates indicate that in the past Christmas we spent between 6.5% and 8% more than in previous Christmas.

Now, to face the beginning of the year, an increasingly used option is to request the so-called fast credit. Only in 2004, the entities of this sector granted in Spain credits worth 11,706 million dollars. This means that about four million Spaniards hired a product of these characteristics, attracted because they allow obtaining the money in a few days without having to give explanations to the financial entity of the use that will be given to the requested capital.

However, the biggest drawback is the high-interest rates that applicants must pay: the annual interest rate does not fall below 20%. For this reason, consumer associations recommend caution when hiring these high-interest loans and advise that families strive to moderate their consumption.

Fast loans are financial loans that are requested

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From 500 to 6,000 dollars, with repayment periods of up to 60 months (five years). They do not usually present opening commissions, although their interests are around 20% APR. This type is usually, sometimes, masking the client informing him only of monthly interests. If that monthly interest is multiplied (around 1.8% by twelve), the clearest reality is seen. In addition, for early cancellation of the loan, commissions usually apply around 1% on the amount that remains to be repaid.

On many occasions, those interested in a fast loan do not usually pay the attention they deserve to the interest rate data that will be applied to the requested money, or to the commissions.

Many users get carried away by the possibility of having the money instantly, which is one of the main characteristics of this type of loan. In addition, the freedom to use the money without having to justify its purpose to the financial institution that grants it is another of the features that most promote your request.

The product is contracted practically without paperwork

The product is contracted practically without paperwork

To be able to subscribe to a loan of this type, the documents that the entities usually request are a photocopy of the DNI, the last payroll, a receipt domiciled in a bank (only occasionally) and the number of the current account in which the loan. The entity undertakes to provide the money within 24 or 48 hours after receiving all the required documentation.

How much does a quick credit cost?

Apart from these “hooks” (widely used in the advertisements of entities), subscribers should not forget to look at the interest rate they will have to pay. It is convenient to make accounts of how much the operation can leave. For example, Good Finance currently offers a loan of 3,000 dollars at an APR interest of 21.92%.

Although at the outset it is a very high interest, the entity tries to make the product acceptable and attractive, allowing it to be amortized within 42 months. Thus, the monthly fee that the customer must pay is 99 dollars. Simple operation allows you to calculate that the customer must pay a total of 4,158 dollars, 1,158 dollars more than what they lend.

In Good Credit they give the possibility of hiring a fast loan of 600 dollars, to be paid in 25 monthly installments of 30 dollars each. The interest rate applied is 25.56% APR. In this case, the client will end up paying 750 dollars, 150 dollars more than requested. Being a smaller amount than those mentioned above, the interest is higher.

From these examples, it can also be deduced that since they are small loans, the entities are interested in offering ample repayment periods since that means charging them higher interest.

However, customers should assess their possibilities and try to find the most suitable combination between the monthly installment to be paid and the total term of the loan. Sometimes, extending the term more than necessary means paying interest for more years and narrowing it in excess can lead to a heavy burden. The important thing is to choose the quota that is most comfortable for the consumer.

What entities grant them?

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A decade ago, only three entities operated significantly in this segment. Today there are five major firms that share the cake of fast credits. Good Credit, Good Finance and E-Money are the three financial credit institutions specialized only in fast loans operating in Spain.

Román García-Miguel explains from Good Lender Bank that they entered this area because they considered that it has a long history. From SCH they estimate that the entry of large entities has given solidity and credibility to this business that, despite everything, is still viewed with suspicion from many sectors.