What does it mean to vouch for a loan? Find out what a guarantor is responsible before deciding whether to sign the contract.
It is no secret that people now have to offer banks more assurance in order to get credit. Low monthly income, bad record and negative credit rating make it difficult for many people to get credit from banks.
In this case, an alternative way for those who want to get credit is to find a guarantor. Below we explain what it means to be a guarantor and what you will be responsible for if you become a guarantor.
What does vouching mean?
The guarantor is the person who takes responsibility for the debts on behalf of another person. Essentially, the guarantor is the person who accepts the responsibility of repayments in cases where the borrower no longer fulfills or cannot fulfill his / her responsibility. If the borrower repays his debt without any problems, the guarantor shall not be liable for any debt.
There may be different reasons why a person needs a surety, and surety can be used for many different types of debt. Loans from banks are a good example. On the other hand, if you are renting a house or shopping with a deed, you may often be asked to find a guarantor.
Who Can Vouch?
Any person older than 18 can legally vouch for someone else. However, accepting the responsibility of repaying someone else’s debt is not a matter to be taken lightly; therefore, they will usually have a voucher relative, a close family friend, or a close friend who has a strong relationship with the borrower.
Although there are no major restrictions on who can be a guarantor, in practice, lenders seek and accept guarantors that meet certain requirements. For example, a bank requesting a guarantor for a consumer loan will require the guarantor to meet the requirements for obtaining a loan, such as a credit note and monthly income. That is, a person who does not have enough monthly income or a low credit rating cannot be a guarantor.
Married consent of the spouse is a must for the guarantor. According to Article 584 of the Turkish Code of Obligations, one of the spouses can only vouch with the written consent of the other, unless there is a separation decision by the court or if the right to legally separate does not arise.
Again, when the debtor fails to pay his debt and the bank fails to collect his debts in any way, he will turn to the guarantor directly. The guarantor will therefore be required to comply with certain requirements, just like the borrower.
Does vouching affect credit rating?
Being a guarantor is a very serious responsibility that should not be underestimated, and if the borrower cannot repay the debt, it will adversely affect the guarantor’s credit rating, future chances of obtaining credit and credit history in general.
In general, in case of missing or delayed payments or a default, this will appear in the guarantor’s credit history. If the loan is paid on time, fully and smoothly, nothing will be reflected in the guarantor’s credit history.
What are the responsibilities of the guarantor?
The principal responsibility of the guarantor is to assume the repayment responsibility in case the debtor does not fulfill or cannot fulfill the repayment obligation unless otherwise specified in the contract.
Banks try to collect their receivables from the debtor in the first place. If the debtor has money in his house, car or bank account, the debt may be collected. However, if the debt cannot be collected in any way, the work will be fully vouched for, and this time in a similar manner, the debt will be collected from the guarantor.