Giraldo Works

To spin or not to spin? 1 decision with great impact

Index

1. what are the implications of spin?

The guarantor is obliged to answer for the default of the principal debtor. The figure of the surety is therefore a guarantee of compliance given to the creditor. This means that, in the event of default by the debtor, the creditor may be paid not only on the basis of the debtor’s assets, but also on the basis of the assets of a third party (guarantor). There is, therefore, a quantitative reinforcement: there are two asset masses to answer for the debt.

In principle, the person who spins (the guarantor) is in a subsidiary position in relation to the debtor and in theoretical terms will never be a true debtor (because he is subrogated to the rights of the creditor, that is, he “replaces” the creditor if he has to assume the debt of the principal debtor). The Surety can be enshrined with the surety having the benefit of the tour. According to this benefit, the assets of the guarantor will only be used when the debtor’s assets are not sufficient.

However, there may be a waiver of this benefit, usually at the demand of the creditors (as a rule, it is the banks that demand it). Thus, the guarantor will assume the debt next to the principal debtor, at the same level (and not subsidiarily).

The guarantor will cease to be so when the debt is settled, there is no possibility of unbinding the bond on the basis of a mere declaration of will. The guarantor, in a merely utopian plan, may ask the creditor to extinguish his bail. This request will hardly be accepted, since the credit was ceded on the basis of the existence of such double assets to ensure the fulfilment of the debt.

This does not mean that the guarantor’s credit will no longer exist in relation to the debtor if it was the guarantor who was responsible for the debtor’s default. Quite simply, in practice, if the debtor has not satisfied his credit, it may not be easy to pay his credit to the guarantor.

2. who can be a guarantor?

In principle, anyone can be a guarantor. However, its viability depends on the case-by-case analysis of the credit institutions.  

For example, by spinning and being a guarantor in a lease contract implies that the same person has the full knowledge that if the person to whom he served as guarantor (tenant) does not fulfill his obligations before the landlord, he will have the responsibility to assume the monthly instalments of the leased property.

If the guarantor in this case intends to cease to be, he will have to wait at least 5 years after signing the contract. 

Note: Unless otherwise stated in the contract, the surety ends after the automatic renewal of the contract.  

3. What Do You Need to Do?

For the bank to accept you as guarantor of a credit, there are some criteria to be fulfilled and they still vary from bank to bank:   

  • To have income from work and that it is sufficient to cover the debt in case of default by the debtor;
  • To be the owner of furniture and real estate;
  • Have a history in the bank that will grant the credit;
  • Never have declared itself insolvent;
  • Not be on the black list of the Bank of Portugal.

We reinforce that these criteria are not constant in all banking institutions: they only aim at framing some of those that are taken into account so that someone can spin and considered as a guarantor of a credit.

Conclusion

This is the bail regime. When we think about it, we have to think about the cases in which there is non-compliance, and what its possible consequences are. However, there doesn’t have to be a default and bail can be useful in terms of improving the conditions attached to the credit.

Check other related news here.

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