In simple terms, a loan is the loan and transfer of a fixed sum of money. The borrowed amount of money must then be paid back to the lender, for which the lender can pay in the form of interest.
What kind of loans are there?
Typical forms of credit are loan contracts, installment purchases and deferrals of payments due until a certain, fixed payday in the future.
A distinction must still be made here between personal loans and bank loans. If relatives or friends grant credit, they usually do not want to earn money with this loan, so that only the loaned amount is paid back. In the case of bank loans, the bank expects profits from interest payments, which can often be considerable. The amount repaid is much higher than the money borrowed.
Loan with guarantee, what does that mean?
If people with low income want to borrow more money from a bank, for example to buy a car or replace a defective washing machine with a new device, the requested bank usually does not agree to the loan request. Banks are only required to grant loans if a certain basic security amount has been retained in the life of the applicant after deducting the credit installment.
A loan with a guarantee is an option here, but still get the required amount of money. A guarantor signs the respective loan agreement and is liable for non-payment. The surety would have to pay the amount due if the borrower failed to pay.
Guaranteed credit is often used by parents for their children or in a fixed partnership if one of the participants has a higher income and there is a basis of trust between the parties.
In the case of a loan with a guarantee, the guarantor should carefully consider whether he can and wants to take the risk of paying the debts that arise in case of doubt. A loan with a guarantee should be carefully considered before the contract is concluded and should not be signed in an affect.