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Differences between endorsement and guarantee in consumer loans

It is common in the financing sector that the terms “guarantee” and “guarantee” are used as synonyms when we talk about some loans that require “additional security” for the bank. However, these terms, although similar, are different and so are the responsibilities they entail. Although it is true that most offers are personal loans without endorsement or guarantee, it is possible that the entity asks us for this type of financial support to approve the request. So, what is the difference between endorsement and guarantee? What types are there? What responsibilities does each one entail? We explain it below.

Differences between a secured loan and a secured loan

A guarantee or guarantee will be requested by the bank when our financial profile (due to savings, type of employment contract, or income, among other factors) is not a reliable safeguard so that we can face the repayment of the credit.

  • A guarantee is a physical asset, that is, a house, a car, a jewel, or any valuable object that serves to cover the cost of the PHH Mortgage loan in the event that we finish paying.
  • A guarantee, for its part, is a type of guarantee and it will be a natural person who will be responsible for repaying the loan in the event that the owner cannot do so.

In both cases, this guarantee will serve so that, in the event that the financial situation of the holder cannot afford the payment of the monthly payments, the capital of the credit can be reimbursed.

Types of guarantors and responsibilities

Within the figure of the guarantor, there are different types of responsibilities that you may have. If we have been asked to be guarantors, it is important to know the different types to choose the one that suits our profile or not to give more responsibility than we should.

The guarantee according to the reimbursement obligations that it will have maybe:

  • Technical, that is, the guarantor will respond, in case of non-payment with their income and their present and future assets to cancel the debt. For example, the car could be seized if the guarantor did not pay with his income.
  • Economic financial, that is, the guarantor would only put his income as a guarantee that the loan would be repaid in case of default.

The guarantor, depending on how the bank claims, may also be:

  • Simple: thus, the bank will first go to the owner and, if the latter does not comply, it will go to the guarantor.
  • Solidarity: in case of non-payment, the bank may go to either of the two.

Thus, a simple and financial-economic guarantor will be the one with the most limited responsibilities, while a technical and supportive guarantor will be the most exposed in the event of default.

Types of secured loans

Loans that require collateral may be of different types. The most common is that they are requested when the product we want to finance is tangible, so a loan for reform is more likely to require a guarantee than a guarantee. There are two types:

Loans with a guarantee of the financed product

In other words, if we choose to finance a car, it will be the vehicle itself that serves as a guarantee of payment if we cannot afford the reimbursement. Generally, when financing a car, we find a less conventional type of guarantee called “Domain Retention” by which the car remains in the name of the dealer until we finish paying.

Home Equity Loans for Other Projects

Home equity loans allow us to finance any project as long as we own a home that we can use as collateral for payment. Thus, the amount that we can obtain will be greater and can be used for any purpose such as undertaking, accepting inheritances, or reuniting debts.

Entity Terms I’m interested

  • Loans secured by a property 

For any person who owns a property free of charges or charges that do not exceed 40% of its value

  • €10,000 – €300,000: up to 40% of the value of the home
  • Up to 20 years to repay the credit
  • From 2% TIN (3.90% TAE)  – 18% TIN (19.90% TAE)
  • Opening commission from 0.25%
  • Possibility of initial grace period of 5 years
  • Signature before a notary
  • response within 24 hours 

Of course, we must take into account that if we put both a guarantee and a guarantee, in the event of non-payment, these people or assets will be used to deal with the debt, so we run the risk of losing, for example, the home or the car put as collateral.

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