There are two questions that change relationships: “Do you want to marry me?” And “Do you want to be my guarantee?” The two could end very badly if the people involved don’t know each other enough.
The word “endorsement” is one of the many that nobody thinks until you need one or, worse, they ask you to BE ONE.
If you are like me and you fight a lot to say “no”, you probably already signed some paper putting your hands in the fire for an acquaintance who needed a guarantee for some credit, and convinced you with a “after all you know that I do pay”. Well, let me tell you what mess you got yourself into. (If you have never been an endorsement, good for you! Read this article so that, if one day they ask you, answer well informed).
What are the obligations of a guarantee?
To be a guarantee is to take responsibility for the debt of your friend, family member or acquaintance. Yes, your signature is like telling the institution “I trust so much that my friend / family member / acquaintance is a good payer, that I answer for him.” Just like that.
Deciding to be or not to be an endorsement is something that you cannot take lightly. I don’t want to tell you to never be (even if it seems so), what I want is to give you all the information you need to make an informed decision.
Here what you should take into account before putting your signature on that paper:
Who are you doing the favor
Why is this point so important? Because your heritage is involved. You must ensure that he is a close, responsible and reliable person. I would even recommend you check your credit history before saying “yes, I accept”, so you can realize whether or not you are a responsible payer. If it’s a “very good people” friend that you met months ago, don’t even think about it.
Your economic solvency
The greatest risk of being a guarantee is that it will be you who answers for the debt. If necessary, would you have the money to do so? Answering that question before signing will prevent one day from having to say “I am a guarantee and I have no money to pay.”
“I already signed, what do I do?”
If you are already a guarantor, do not lose track of the debtor or disregard that debt. You have the right to ask him how he is going with the payments, if he has been late or not, how much he has left to settle, etc. Remember that this debt is a shared commitment, that is why it is so important to know for whom and for whom we do not risk being collateral.
“I am a guarantee and I do not have to pay the debt of another person”
Being a guarantee, nothing guarantees you that the person you are supporting can pay the commitment you made, why? because we are all exposed to unforeseen events that could complicate our finances, and the debtor you endorsed is no exception. What to do then?
Let’s answer some frequently asked questions:
If I am a guarantor and the debtor does not pay, can I stop supporting his debt?
No. By signing as collateral you are accepting a debt contract, and to modify it, creditor, debtor and collateral must agree. It is not an impossible process, but it can be very VERY complicated and yet it is most likely not successful (99% sure it will not be), because it depends largely on the institution that granted the credit.
Generally, what happens when the debtor can no longer pay is that the guarantee decides to pay the debt so as not to affect their assets and then solve the problem with the debtor externally.
Can you garnish me for being a guarantee?
Yes. That is why the institutions ask their accredited for a guarantee, so, in case they no longer have the resources to continue paying, the guarantee will answer for them. Once the person stops paying, the institution will conduct an investigation (let’s call it that) to determine if the person is in bankruptcy and does not have the resources to face their obligations. If so, the institution will “go” for the money or assets of the guarantee.
If I am a guarantee, can I sue the debtor?
No. Remember that signing as an endorsement is an act of “good faith” that is done voluntarily and selflessly, so it is very unlikely that a guarantee will succeed with a demand of this nature.