How can I stop being a guarantor on a loan?

Why wanting out is not enough

The guarantor entered into an obligation with the bank and the law does not allow a contract to be left to the discretion of only one of the parties. That is why the following are not enough on their own:

• A letter or a “burofax” (a certified letter with proof of content) to the bank saying that you no longer want to be a guarantor.
• An agreement with the debtor, even if it is signed before a notary. It binds the two of you, but not the bank.
• Whatever the divorce agreement or judgment says. The bank is not a party to the divorce and is not bound by what is agreed or decided in it.

The 2019 “Ley de Contratos de Crédito Inmobiliario”, Spain's mortgage credit act, protects a guarantor who is a private individual, for example with information in advance and an explanation from the notary before a mortgage on a home is signed. But it does not give them any right to withdraw from the guarantee.

The routes that do work

• The bank agreeing to release you. A document is signed, normally before a notary if the loan was signed that way, in which the bank consents to your withdrawal. It is not obliged to do so and usually asks for something in return, such as another guarantor, a mortgage or a deposit that is frozen as security. It is easier if a good part of the loan has already been repaid or if the debtor has a stable income.
• The debtor repaying the whole loan. When the debt ends, so does the guarantee.
• The debtor moving the loan to another bank that does not require a guarantor. If the old loan is paid off, the guarantee ends with it. But if it is a mortgage and the switch is made by subrogation, in which the new bank takes the old bank's place in the same loan, the guarantee may pass to the new bank together with the loan, unless the new bank agrees to release you.

Once you have achieved this, ask the bank for a document stating that you are no longer a guarantor. A few months later, check that the guarantee no longer appears in your name in the Bank of Spain's “Central de Información de Riesgos”, the register of loans and guarantees that banks consult.

When the law treats the guarantee as ended

There are cases in which the guarantee is extinguished even if the bank does not say so:

• If the bank gives the debtor more time without your consent. Many loan agreements state that the guarantor accepts extensions in advance, so they need to be read.
• If, because of something the bank has done, you can no longer take its place in the securities for the debt, for example because it discharges the debtor's mortgage without having been paid.
• If the bank accepts a flat or another asset in payment of the debt, known as “dación en pago” (a transfer in lieu of payment).

Nor are you liable for increases in the loan that you have not accepted, because the guarantee does not extend beyond what you signed. And as against the debtor, not the bank, in some cases you can require the debtor to obtain your release from the guarantee or to give you security, for example if you have been sued for payment, if the debtor is insolvent or if the debt has already fallen due. If the bank has given more time or refinanced the debt without consulting you, it is advisable to have a lawyer check whether the guarantee is still in force.