A negative Credit Bureau is the presence of at least one negative characteristic in a Credit Bureau report. In the perception of many consumers, this is considered a safe reason for exclusion when lending without a guarantor. In fact, not all financial institutions behave so rigidly, so that a soft negative feature does not necessarily prevent credit from being granted.
This applies more to branch banks than to direct banks, since the impression made in the personal loan discussion also contributes to decision-making. A surety is liable for the loan repayment if the actual borrower cannot make it. This increases the security of credit considerably.
The advantage of a guarantor when applying for a loan
Many applicants receive the desired loan despite a negative Credit Bureau with a guarantor, since its provision increases the likelihood of the loan being properly repaid. A prerequisite for lending is that the guarantor has faultless Credit Bureau information and the highest possible score. In contrast to the information regarding existing negative characteristics, not all banks take into account the score value calculated by Credit Bureau when making their loan decisions, since some financial institutions regard the method of calculation, which is largely not disclosed to them, as questionable.
A further prerequisite for the successful application for a loan despite a negative Credit Bureau with guarantors is that the guarantor has a sufficiently high income to settle the obligations that may be associated with the guarantee.
The strict income assessment used here is necessary because the legislator classifies a guarantee as ineffective if it overwhelms the guarantor financially and this fact becomes apparent to the bank when the loan application is properly examined. Due to the legal requirements for the legal effectiveness of a guarantee, the bank places stricter requirements on the guarantor’s household accounts than on the actual borrower.
The type of guarantee
If the bank grants a loan despite a negative Credit Bureau and with a guarantor, it usually requires a joint and several guarantee. This form of guarantee allows the lender to require the guarantor to settle the liability without having previously unsuccessfully enforced the lender. In addition to the outstanding loan amount, the bank can charge the surety the accrued interest and the cost of the loan termination.
It is customary to first warn the borrower and to notify the borrower in the event of non-payment. If a guarantor repays the loan, he is entitled to the reimbursement of the amount he has paid by the actual borrower.
This claim does not have to be agreed separately, but results from the nature of a guarantee in the case of a loan despite a negative Credit Bureau and with guarantors. In reality, the legal claims resulting from a guarantee can often not be enforced because the borrower is not sufficiently solvent to repay the debt.