Details of the bank guarantee
The bank guarantee is indispensable in business life, it helps the company to improve its liquidity. The necessary credit does not have to be taken up thanks to the bank guarantee. Although the bank as a guarantor sounds positive, the bank demands collateral in return. Appropriate fees are charged annually.
The following examples illustrate the meaning of this clause with the phrase “providing collateral”: A customer has made a substantial down payment. However, the customer wants to see certain collateral to be reassured, should the order burst.
A warehouse is rented for the company, the landlord insists on a deposit. Also here is the bank guarantee to use. If a business partner wants collateral, but the entrepreneur does not want to attack his reserves and does not want to reduce his liquidity, this solution is the right choice.
Another plus point is that a bank guarantee is awarded only if the credit rating is good; At the same time, the business partner is informed that no financial difficulties can be expected from the debtor in the foreseeable future.
In the commercial sector, the entrepreneur remains liquid, which is of the utmost importance for future business. The bank guarantee can be set up here in the form of a fixed credit line. This alternative is interesting and appropriate for the entrepreneur.
Realizing the security deposit with the bank guarantee provides advantages as well as disadvantages. The tenant does not have to pay a security deposit in cash for the time being; however, annual contributions are to be paid to the bank. As security, the salary account of the renter is usually used.
The landlord does not have to set up a rent deposit account, which he is usually required to do. If the deposit should be claimed, the landlord turns in this case to the bank. The disadvantage, however, is that the liquidity of the tenant drops, because the dispolimit or credit limit are reduced by a bank guarantee is issued.
Of course, the tenant does not get interest on the deposit amount. However, deposits are usually quite high, starting with three-digit amounts, so that the tenant does not have to pay the deposit of his savings, which is absolutely to be regarded as an advantage.
The lease in connection with an Avalbürgschaft is of course appreciated by the landlord. The tenant has a good credit rating, otherwise he would not have a bank guarantee, the landlord knows that.
The Aval guarantee – alternatives
The guarantee, or bank guarantee, is considered as an important financial instrument, benefits are created for all concerned. Collateral and deposits are provided with simultaneous protection of the credit rating. Business partners are convinced of the liquidity of the partner, since otherwise the use of an Aval guarantee is not possible.
Banks also offer surety insurance as an alternative. At this point, different guarantees are used for customer liabilities.
Example from everyday life
A private man buys a car worth 30,000 euros. If there are no savings, a loan of € 30,000 must now be taken, which is paid in monthly installments.
If a guarantee is used, the bank pays the debt. This event can occur, for example, in case of job loss.
Guarantee in the private sector
In theory, it sounds good, a guarantor takes over the debt in an emergency. For the borrower or new tenant, however, now the question arises, who is ready to vouch? That not many people get involved in it is clear at first glance. Family members and spouses are more willing to take on a guarantor, which is mandatory.
As a rule, there is no time-limited bank guarantee, the guarantee is irrelevant the moment in which the debts are settled. Of course, if a bank guarantee is used, the guarantor is basically the bank, but the creditworthiness of the debtor must be very good.
Tips for using this financial instrument
In the area of rent deposit, the use of the Avalbürgschaft is to be advocated. For the average citizen, moving means spending and spending again. The deposit does not have to be paid in cash, while the fee charged depends on the amount of the deposit, but is never exorbitantly high.
Average annual fees for deposit guarantees
Corresponding comparison computers on the Internet inform consumers about the current fees presented by different banks.
Banks charge fees that are not uniform. Here are some examples, based on a deposit of 1800 Euros and different interest rates:
- 71.82 euros eff. Annual interest 3.99%
- € 84.60 eff. Annual interest 4.70%
- 94.50 Euro eff. Annual interest rate 5.25%.
If the guarantee is to be obtained from a direct bank, it makes sense to use a comparison portal. Usually, however, the customer goes to the house bank, the customer is known. There are some advantages that justify an annual fee:
- The rental deposit is provided without cash,
- The landlord can reliably claim any expenses if they are justified.
- The bank has the opportunity to provide more collateral with optimal terms.
Companies that make large down payments to be prepared for additional customer orders require guarantees to reduce risks, and of course ensure that their reputable banks conduct their business efficiently.
What needs to be considered
The instrument should in principle specify a maximum amount; in the case of rent, the maximum amount may not exceed three months’ rent. The exception is the blank bank guarantee, which is used exclusively in the commercial sector. Creditors, debtors and guarantors must in principle be listed by name.
The intended purpose is to be indicated, because the creation of this document is based on the rent deposit and the consequent circumstances. Of course, a car painting or a furniture purchase may not be claimed.
Bank guarantee must not be confused with a payday loan. This financial instrument is merely a guarantee to the creditor that the debt will be settled in any case, whether by the debtor or by the bank. The resulting consequences are relevant to the debtor and the bank.
In the private sector, this variant usually comes into force with rent deposits. The landlords welcome this variant, because there is no need to open a separate account under the name of the rental deposit account. The claimed Aval guarantee minimizes the liquidity of the tenant, which is however known to the tenant.
It is positive for the tenant, currently not having to raise large sums for the deposit. However, the tenant’s salary account is usually considered as collateral.
Different forms of the respective guarantees ensure the minimization of the risks. Of course, a bank guarantee is in any case considered serious and optimal for the creditor. Of course, guarantees in the private sphere of family members or spouses are not to be regarded as guarantees to the same extent.
The creditors are aware that only persons or companies with impeccable credit ratings receive a bank guarantee. Thus, the seriousness is already clear. If you have a good credit rating, you must give the bank less collateral. These features are also known to the landlord in the field of rent deposit.
For large companies and in the construction industry, the deposit guarantee or prepayment guarantee is decisive in order to be able to plan properly. Given the relatively high sums of money, the deposit guarantee is essential, as meeting deadlines and observance of completion dates are of utmost importance in this section. The amount of the advance payment should not exceed 30% of the total amount.
The bank guarantee ensures trust between the creditor and the debtor, so that liquidity is maintained. The annual fees are reasonable. The advantages of the mentioned different guarantee obligations must be taken into account compared to a minimum fee payment. As a rule, these financing instruments are provided by the house banks, although many direct banks advertise in this area.