Let's say a relative or close friend asks you for a loan guarantee. A very close friend, and a very beloved relative. He dreams of a new car or needs money for a business, but the bank requires a surety. Should I agree?
You are the guarantor. What does it mean?
This means that you have made a commitment to answer to your friend's or relative's creditor. If your friend, for whatever reason, cannot pay for the loan, the bank has the right to demand this money from you.
The whole amount or part - as he wants. It will not be you who will decide, but the bank. Maybe the bank will sue a part of the money against a borrower friend. Then you will only pay the remainder. Or maybe the bank will not sue a friend at all, but will come to you right away, because your salary is higher and your car is more expensive.
If there are several guarantors
By default, the surety provides for joint and several liability. This means that even if there are several guarantors, the bank has the right to collect the debt only from you. All sum. From the debtor - nothing, even if he has an apartment and a car. And from you - everything.
Even if you have two children, the apartment is on a mortgage and your parents are retired. They will keep half of their salary, and nothing can be done about it. Or they will immediately write off money from the card on which you saved up for vacation.
The surety paid off someone else's debt
For example, you vouched for a consumer loan for 100 thousand and the bank collected a friend's debt from you. Now you have the right to collect this debt from your friend. This is called a recourse claim. But if the bank fails, will you succeed?
If the debtor is dead
Anything can happen. If his life was insured, the insurance will pay the loan. But for consumer loans, life is often not insured. Your surety does not end with the death of the debtor. Now you owe the bank money.
But the heirs owe you, but only within the limits of the inheritance value. If, of course, there is an inheritance at all. It will not work to refer to the fact that the borrower left nothing or left little. The guarantor must repay the entire amount with interest.
Conclusion
These are general rules, but there are many nuances with the surety. Sometimes one line in the contract decides everything. A good lawyer will be able to cancel the surety or reduce the debt. But it is very expensive, and you will have to fight with the bank, which in such cases ate more than one dog and which definitely has no problems with money for lawyers.
All this is not a reason to refuse to help, but definitely a reason to think.
