# Does a personal loan automatically carry a guarantee



## Stressed1 (20 Oct 2011)

About 6 years ago I personally borrowed 2m with my wife to buy a commercial property on an interest roll over at 1.2 over euriobar we signed a loan agreement for a 5 year term. 4 years into the loan I called a meeting with the bank to change the terms I was nothappy with the loan getting larger and larger. I asked them could I pay 200k if the capital and start paying interest only for the rest of the loan term. They advised me they would have to issue a new agreement in place so I agreed. They sent a new letter of offer for a further 5 years increasing the rate to 1.7 over euriobar I hesitantly agreed so a new term was put in place. We have never missed a payment but now it's getting really tough as my business is struggling And I dont know if I can make the next two years patmens while maintaining my health and business as I Am Working purely to pay the interest to the bank now.
When the money was given I made it quite clear I would not under any circumstance sign a personal guarantee. They replied there was no need to they were happy with the property as security
On the letter of offer the heading stated.

 SECURITY REQUIRED

LAnds and buildings at .........

And below that it stated in another heading:

ADDITIONAL SECURITY REQUIRED

no additional security required

This lead me to believe they were holding the property the money was borrowed for as security. And I made a point of asking the manager at the time is this all you require for security no house or business but just what it states on the letter, he assured me that was tithe bank were happy with the lot they had.

However now me may have an issue paying and when speaking to various financial and legal people I have been informed that the bank automatically have a personal guarantee when you borrow the money in your own name. I'm disgusted that they would have led me to believe this now I'm up the Walls with worry as there is no way possible in 2013 I will be able to pay this debt.

[*]Does anyone have any views or ideas on this would really appreciate and help at all thanks
[/LIST]


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## Brendan Burgess (20 Oct 2011)

Hi Stressed 

Here is the legal position:

You took out a personal loan. 
As a result you owe the money. 
If you default on the loan, the bank can repossess the security and sell it. 
The proceeds will reduce the amount you owe the bank.
However, you will still owe the balance. 

Virtually all loans in Ireland operate like this. They are full-recourse loans. 


A guarantee is something different
If the bank had asked for a guarantee, you would have had to find a guarantor. For example, your father might have guaranteed that if you did not make your repayments,  he would do so for you.

So there is no guarantee on this loan.

However, you are personally liable for the full amount.


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## Stressed1 (21 Oct 2011)

Sorry Brendan,
I worded this incorrectly i meant does every loan automatically carry a personal guarantee, because the bank asked me to sign a personal guarantee when we were taking out the loan, however i point blanked refused to sign, so they agreed to give it to me without and personal guarantees which  lead me to believe that the only security they were taking was on the actual site and buildings, leading me to believe that should something happen then it would be only the buildings and site they would take back.

However they have moved the goal posts now and have informed me by letter that they are changing the way they work out their interest rates from euriobar to bank cost of funds and this means an extra 2k per month which means it could put me under. Is this also standard procedure !

*IN CASE ANYONE IS INTERESTED THIS IS BANK OF IRELAND*


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## GuitarDave (21 Oct 2011)

Well your best thing to do is actually ask the bank you took the loan from instead of speculating! If you're going to run into difficulties with repayments a conversation with the bank is going to have to be had anyway and it's better to get these things sorted before it gets further and further into arrears.


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## Stressed1 (21 Oct 2011)

I have already had a conversation with the bank in fact i called the meeting, basically the answer i got was that if the interest only payments are not met then the loan will go into default. This effectively means that they can if they so decide to make me bankrupt. So i suppose at this stage its a game of poker, but ultimately its going nowhere a better option would be for them to sit down with me and look at the whole situation, we both entered into a contract, i borrowed the money and have the responsibility to pay it back, however they gave me the money so they also have a responsibility and we could meet half way, then they would get the interest due to them upfront and some more and the site could be sold and the bank take a hit and i take a hit. because ultimately its going to end up thaat way 2 years down the road !
except i will be unable top give them anything in two years.

PS: this loan is not in arrears i am still up to date with all my payments and will continue to be up to date to the end of the term of contract, however the principal is not changing so therefore the money i am paying them now is simply going down the toilet and not improving any situation theirs or mine.


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## GuitarDave (21 Oct 2011)

GuitarDave said:


> Well your best thing to do is actually ask the bank you took the loan from instead of speculating!





> I have already had a conversation with the bank in fact i called the meeting,



So your original question...



> does every loan automatically carry a personal guarantee



...Should've been answered then.

Also I said IF you're going to run into difficulties.

Anyway, before it would ever even get close to bankruptcy proceedings being started there's usually every attempt made to come to some sort of an agreement. The use of scare tactics is not uncommon.


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## Brendan Burgess (21 Oct 2011)

> the bank asked me to sign a personal guarantee when we were taking out the loan, however i point blanked refused to sign,



This does not make any sense to me. You can't guarantee yourself. Were they asking you to get someone else to guarantee it? 

I presume that this loan is to you personally and to a limited company?


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## GuitarDave (21 Oct 2011)

As above, is this actually a personal loan or a business loan?


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## Bronte (21 Oct 2011)

Stressed1 said:


> They advised me they would have to issue a new agreement in place so I agreed. They sent a new letter of offer for a further 5 years increasing the rate to 1.7 over euriobar I hesitantly agreed so a new term was put in place.
> [/LIST]


 
This looks like you signed a new agreement, so a new contract for a higher rate of interest.  Later on in this thread you said they are changing the goalpost.  Are you saying they are going to charge you higher than that which you signed for at 1.7 over Euriobar?

As you've made all repayments, the bank would be under the impression that everything is ok.  Have you written to them outlining your financial situation.

Do you have many assets other than those mentioned as security for the 2 million loan?


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## Stressed1 (22 Oct 2011)

to brendan
the loan is personal to myself and my wife, no it is not to a limited company and yes from what i can see they were asking us to guarantee ourselves ie give extra security, and im as confused as you are because now im a lot wiser and know a lot more about it than i did then, and it doesnt make sense to me, but this is irrelevant now i suppose because we both know now that when you borrow the money in your personal name it automatically gives the bank the right to go after everything if you go into default. Or it certainly appears that way.

My real problem with this is, the sly way the whole thing was done, i asked specifically if there was any security they required other than what they had listed on the letter of offer and the manager assured me there was no other security required, I even asked him if there was any difficulty with the payments would they come after anything else and he said no its written on the letter of offer and stated what the security is, this was a senior business lending manager no a manager in a branch, i took him at his word.

I appreciate where you are coming from with this and at this stage i must look like an idiot because now i would have a very different approach to it, and there is no way i would borrow the money on those terms now, but thats a bit like shutting the gate after the horse has gone out.

However the amount of business people that i have spoken to recently that are not aware of this is astonishing.


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## Stressed1 (22 Oct 2011)

To Bronte,
No Bronte i have not signed a new agreement since i am still working of  the 5 year agreement that states 1.7 over euriobar, but i got a letter  in the post stating that the bank are changing the way they calculate  their interest rates and fron november 16th i think thats the date i  dont have the letter in front of me now, they will be calculating the  rates from bank cost of funds, and it will put approximately .7 extra on  my repayments ie 2000 per month extra approx, now you tell me is that  fair.

Yes the bank are quite happy to carry on the way we are as they are  getting every penny they demand, however it is having a huge impact on  me my family and our business which like every other business is  struggling to keep people employed and keep the doors open at the  moment. I suggested to them at the last meeting that we could reduce the  rate to ease the pressure, but they specified that the loan then would  technically go into default, so you can see where they are going with  this now, that would leave two options they draw up a new loan agreement  and i can only imagine what the repayments would be, or they bankrupt  me and take everything they can get.

yes i do have other assets and i would probably have a net worth of  maybe half the amount of the borrowing say 1m maybe so that would leave  me still owing over 1m then they could fire sell the property and leave  me still owing money and god knows what legal costs.
however now i would have nothing after 30 years of grafting my ass off,  nothing for the kids nothing for a retirement no pension nothing, i dont  want that, i want to meet it half way, and im prepared to do that, i  want them to share some responsibility i have already paid them close to  500,000 already in interest. Since the loan started.


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## Time (22 Oct 2011)

Look into bankruptcy.


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## Stressed1 (22 Oct 2011)

Time
Thats ironic that you should say that because i have just been reading on another section of the forum about bankruptcy in the uk, and i was just thinking maybe this is the route to go down - what a terrible shame heres someone trying to do the right thing hold my head high take my responsibilities on board and end up coming out the worst for it.

So now if i go that route the banks get nothing theres 17 people out of work a business closed more unemployment even though small but it all adds up, i never thought i would see the day it would come to this, but maybe you are right perhaps its time for me to look after myself and family and to hell with the banks and everyone else.


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## Time (22 Oct 2011)

Look out for number 1. There is no shame in doing that.


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## Stressed1 (24 Oct 2011)

Spoke to someone in banking today and was informed that deals will definately be coming down the road, on an individual case basis however the bigger ones will be attended to first, but maybe its a little bit of light at the end of the tunnel hopefully. And from what i was told things are not things better on the ground at the moment.


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## solesurfer (25 Oct 2012)

I have a client in a similar position. They took out the loan in joint names (two brothers).
The security offered was the commercial building/site and life insurance policies to cover the loan amount.
The letter of sanction states*:"the Borrower is acting within the Borrowers business and is therby not acting as a "consumer" within the meaning of Section 2 of the Consumer Credit Act, 1995"*
They have defaulted on the loan and have agreed with the bank to sell the property it is currently for sale, but the sale price, if sold, will be significantly less that the loan amount.
They are both very worried that the Bank will follow them for the shortfall and force them to sell their family homes, and any other assets they might have.
They did not sign any personal guarantee.
My question
*"Can the bank chase them for the shortfall"??*


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## tvman (25 Oct 2012)

Short answer yes, unless:
- the letter of offer explicitly states that recourse is limited to particular assets (this would be very unusual but was offered where banks were very keen to get a deal and the security was worth significantly more than the loan)
- or the loan was to a limited company


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## solesurfer (25 Oct 2012)

Ok, Thanks for that.
Would their wifes have any input as they are nothing to do with the commercial loan?
One of their houses has a morgage, the other is unincumbered.
They are both in the process of transfering their homes to their wifes.


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## lovelyhorse (1 Nov 2012)

My intention is not at all to be mean ... but you borrowed 2 million euro without checking what your personal liability was with a solicitor or similarly knowledgeable person?


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## PiedPiper (2 Nov 2012)

There are a few options.  Don't be stressed.  You have time calm it all down for yourself.  Was it a general notice unsigned you got or a letter specifically for you?


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## Jim2007 (2 Nov 2012)

solesurfer said:


> They are both in the process of transfering their homes to their wifes.



Yea, that does not really work - ask Sean Quinn...  If the sole purpose is to frustrate the creditors, then it will be very hard to defend in court.


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## Bronte (5 Nov 2012)

solesurfer said:


> One of their houses has a morgage, the other is unincumbered.
> They are both in the process of transfering their homes to their wifes.


 
The banks are not stupid and can get this undone.


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