This morning we are addressing an important aspect of your credit application: guarantees. In certain cases, the borrower will have to provide security for his credit request. Sometimes, this is the obligatory signature of your spouse or your partner. In certain cases, the guarantees presented by the borrower could prove insufficient and the credit application would then necessarily have to be accompanied by additional guarantees. In the area of guarantees: we will distinguish between real and personal security. In a second part we will deal with the assignment of debts and finally we will end with the guarantee. This trilogy of articles will give you a synthetic and complete view of the concept of guarantee in terms of credit.
The concept of guarantee
The activity of lender is of course not without risks: when the lender cannot repay its debt, the bank could incur a loss. Furthermore, it sometimes happens that a customer does not provide all the guarantees required for a loan and that it is necessary for a third person to sign alongside them (spouse, cohabitant, parents, guarantors).
The function of guarantees – also called “securities” for the lender – is to reduce the financial consequences of the risk of insolvency of a debtor customer. It allows him to recover all or part of his debt.
Legal forms and advertising
Most security interests require legal forms of creation and disclosure measures. For example, a free guarantee, that is to say, a third person who commits to your side requires the drafting of a guarantee contract separate from the credit contract. Likewise, the creation of a mortgage (real security) requires a notarial deed (authentic deed) and is registered with the Registrar of Mortgages. Failure to comply with these formalities can completely destroy the value of a security interest.
Types of guarantees
We distinguish between real security and personal security:
- Real security interests relate to one or more specific movable or immovable assets. For movable property, we generally speak of pledges and for real estate, we mainly refer to mortgages.
- Personal securities involve the engagement of a third party, a person who serves as security. These are essentially the sureties.
Match your credit application with a guarantee
A customer who has submitted a credit application may sometimes be initially refused: in this case, it may turn out that the solvency guarantees presented by the customer are insufficient.
In this case, our brokers will look for solutions with you:
- Thus, for the case of a married couple under the regime of separation of property: if one of the spouses wants to take out a loan to purchase property of their own, they may be asked to attach the signature of his husband;
- Likewise, the borrower could add the recourse of a third person as personal security.
These guarantees will be likely to fundamentally change the profile of the borrower’s file and thus can usefully promote acceptance of the credit application.
