What should you know about the provision of a surety?
A surety is a promise by a guarantor to fulfil the financial obligations of another person or company (borrower) on their behalf, if necessary. A surety is therefore a guarantee provided by a guarantor. If the borrower runs into debt, you as a guarantor may be required to pay their debt.
Remember to only stand as a surety for those people and companies you know well and have confidence in.
Before giving your permission to act as a surety for someone:
- carefully consider whether it is within your means to meet the borrower’s obligations (including, but not limited to, making loan payments on their behalf, if necessary). In doing so, you should take the possibility into account that your life may change and your financial situation may worsen as a result;
- assess your solvency carefully and only provide a surety in such an amount (this is the maximum amount of the guarantor’s liability) that you are able to pay;
- thoroughly review the contract of suretyship prepared by the bank and the loan agreement projects;
- always provide the bank with correct and sufficient information about your financial situation, as this allows the bank to assess whether you are able to comply with the borrower’s obligations;
- do not hesitate to contact the bank to find answers to your questions and use legal aid, if necessary.
When you start signing a contract of suretyship:
- listen very carefully to the bank clerk’s explanations of both the loan agreement and the contract of suretyship;
- do not be afraid to ask questions if something remains unclear;
- check that your contact details (address, phone number, email) are correct in the contract of suretyship.
Once you have signed a contract of suretyship:
- show your interest in the progress of the borrower’s performance of the loan agreement. If the borrower does not respond to your questions, please contact the bank;
- inform the bank immediately if there have been any changes in your contact details (address, phone number, email). Only in this way can you be certain that you will receive the necessary information on time;
- read the bank notices carefully and be sure to collect any registered letters addressed to you.
Please remember that acting as a surety means that you are liable for ensuring the performance of the agreement of the borrower.
If the borrower fails to perform their obligations (especially if they do not make the loan payments), the bank will contact you and give you the opportunity to pay the debt on behalf of the borrower. Please remember that by signing a contract of suretyship you have undertaken to fulfil the borrower’s financial obligations on their behalf (i.e. pay the debt). If you pay the debt, you will be able to avoid any additional costs and possible litigation. You have the right to demand reimbursement from the borrower of the amounts paid to the bank on their behalf.