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    Bank Guarantee

    A bank guarantee refers to a promise provided by a bank or any other financial institution that if a certain borrower fails to pay a loan, then the bank or the financial institution will take care of the losses. The bank will assure the original creditor through this bank guarantee that if the borrower does not meet his or her liabilities, then the bank will take care of them.

    A bank guarantee is a contract between 3 different parties and they include:

    • The applicant (the party that requests a bank guarantee from the bank and borrows from a creditor)
    • The beneficiary (the party that receives a partial guarantee)
    • The bank (the party that agrees to sign and assures payment in case the applicant fails to repay the loan)

    Bank guarantees are very commonly utilised among business entities. With the help of a bank guarantee, the debtor or borrower or customer will be able to purchase equipment, machinery, raw materials, acquire additional funds, etc. for commercial purposes. Bank guarantees help businesses as creditors will get a proper reassurance that the loan amount will be repaid by the bank if the business is unable to repay the loan entirely on time.

    When a bank signs a bank guarantee, it promises to pay any amount according to the request made by the borrower. Hence, signing a bank guarantee implies a high risk for banks.

    Understand the Process of Bank Guarantee

    • First, an applicant will ask for a loan from a beneficiary or creditor.
    • While applying for the loan, these 2 parties will agree that a bank guarantee is necessary.
    • Then, the applicant will request a bank to provide a bank guarantee for the loan taken from the creditor. The bank guarantee will be taken on behalf of the creditor.
    • The bank will now offer the bank guarantee to the applicant and send a financial instruction to an advising bank.

    Kinds of Bank Guarantee

    • Deferred payment guarantee: This refers to a bank guarantee or a payment guarantee that is offered to the exporter for a deferred period or for a certain time period. When a buyer purchases capital goods or machinery, the seller will give credit to the buyer when the buyer’s bank gives a guarantee that it will pay the unsettled dues of the buyer to the seller. Under this type of guarantee, payment will be made in installments by the bank for failure in supplying raw materials, machinery or equipment.
    • Financial guarantee: A financial bank guarantee assures that money will be repaid if the party does not complete a particular project or operation entirely. According to the financial guarantee agreement, when there is a delay in the completion of the project, the bank will make the payment.
    • Advance payment guarantee: Under this kind of guarantee, an advance payment will be made to the seller. There will also be a guarantee that if the seller fails to deliver the service or product accurately or promptly, the buyer will receive a refund of the payment.
    • Foreign bank guarantee: A foreign bank guarantee is provided by a bank on behalf of a borrower. This will be offered on behalf of the foreign beneficiary or creditor.
    • Performance guarantee: Under a performance guarantee, compensation of money will be made by the bank when there is any delay in delivering the performance or operation. Payment will have to be made even if the service is delivered inadequately.
    • Bid bond guarantee: Under this type of guarantee, there will be a supply bidding procedure. This will be conducted by the contractor for the owner of an infrastructure or industrial project or any kind of operation. The contractor of the project will guarantee that the best bidder or the highest bidder will have the capability and authority to implement a project as per his or her preferences. The bid bond will be given to the owner of the project as a proof of guarantee and the bond will imply that the project will have to be devised according to the bid contract.
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    Comparison between Bank Guarantee and Letter of Credit

    Many times, people get confused between bank guarantee and a letter of credit. However, one should understand that both are pretty different.

    A bank guarantee refers to a commercial or financial instrument that is provided by a bank, where the bank assures or guarantees a beneficiary that it will make the payment to the bank in case the actual customer fails to meet his or her obligations. The bank will pay on behalf of the customer who requests for a bank guarantee.

    On the other hand, a letter of credit refers to a promise or commitment in writing made by a bank or any other financial institution or corporation to a particular seller that payment will be made to the seller if the seller completes performing whatever is mentioned in the letter of credit. For the bank to make the payment on behalf of the original buyer, there should be a documentary proof that the seller has completed the transaction accurately by delivering the right product or service on time. The seller will get a guarantee from the bank that the seller will definitely pay the amount on behalf of the original buyer once the obligations are fulfilled.

    Under a bank guarantee, if the buyer is unable to make the payment to the seller or creditor, then the bank pays the fixed amount to the seller as the obligations of the contract are not met. On the other hand, under a letter of credit, the bank makes the payment to the seller once he or she delivers. This is because the seller has completed fulfilling the required obligations.

    Bank guarantees are competitively priced in nature generally. They are usually valid for a long period. The tenure of a bank guarantee is usually high. Moreover, bank guarantees are commonly accepted in almost all countries. Bank guarantees are available in Indian Rupee as well as currencies of other nations. Hence, they are very helpful for global transactions with parties in different foreign countries.

    Personal Loan Reviews

    • Bank Bazaar Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have been using the Bank Bazaar platform for a while. The experience was good, everything was good. I never faced any problems with their services, the website is user friendly, it is easy to access. And the whole application process was easy and hassle free. Overall it has been a smooth experience with the Bank Bazaar platform.
      Was this review helpful? 0
      , mumbai
      Reviewed on Nov 15, 2018
    • Early Salary Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have been holding my personal loan with Early salary recently,the loan amount they have given me was less i had expected more, and the rate of interest they have charged me was up to 600 and they have not charged any processing fee ,till now i did not face any difficulty.
      Was this review helpful? 0
      , mumbai
      Reviewed on Nov 15, 2018
    • Bank Bazaar Personal Loan
      "Best card"
      0.5 4.0/5 "Great!"
      I have been using bank bazaar service for first time,i came to know about bank bazaar service through on line, i have been using website it is easy to access,there customer service where prompt they explained me about the loan which i have applied recently.
      Was this review helpful? 0
      , mumbai
      Reviewed on Nov 15, 2018
    • Early Salary Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have been holding my personal loan with Early salary recently,the loan amount they have given me was sufficient, the rate of interest they have charged me was nominal and the processing fee they have charge me was nominal too, and there was no issue till now i had been faced.
      Was this review helpful? 0
      , mumbai
      Reviewed on Nov 15, 2018
    • Bank Bazaar Personal Loan
      "Outstanding"
      0.5 5.0/5 "Blown Away!"
      I took a personal loan with the help of bank bazaar. This is my first time and came to know about the website through online. The customer service and response was good. The process is excellent and it was easy to do comparison. I have used the website, its user friendly.
      Was this review helpful? 0
      , new delhi
      Reviewed on Nov 15, 2018
    • Early Salary Personal Loan
      "Excellent"
      0.5 5.0/5 "Blown Away!"
      The service is good but the loan value is very less which needs to be increased. The rate of interest is good with Early Salary. I have taken only 9K and they didn't charge anything. It was quick and immediate service. I have submitted the documents online.
      Was this review helpful? 0
      , new delhi
      Reviewed on Nov 15, 2018
    • Bank Bazaar Personal Loan
      "Best service"
      0.5 5.0/5 "Blown Away!"
      I have been using bank bazaar service for first time, i came to know about bank bazaar service through my friend as he had referred me about this service,have been using website for applying my personal loan and after that i had downloaded mobile application for tracking my details.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 15, 2018
    • Early Salary Personal Loan
      "Best service"
      0.5 5.0/5 "Blown Away!"
      I have been holding my personal loan with Early salary recently,the loan amount was sufficient for me, they have give me loan amount by calculating my salary, the rate of interest was nominal they have charged like if i clear today then my rate of interest will be less tomorrow, they have not charged processing fee.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 15, 2018
    • Bank Bazaar Personal Loan
      "Good and faster experience"
      0.5 5.0/5 "Blown Away!"
      Best about the bankbazaar providing the services on time to the customer. Customer care service of bankbazaar is really fine. From last 3 months i'm utilizing the services and i have come to know about this website through Internet. The waiting time has to be improved in the customer care services.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 15, 2018
    • Bank Bazaar Personal Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been using bank bazaar service for first time, i came to know about bank bazaar service through on line, and there service is accurate and clear and there customer service where prompt they explained me about the loan which i have applied recently, i have been using website it is easy to access.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 15, 2018
    • Early Salary Personal Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I have been holding my personal loan with Early salary recently,the loan amount they have given me was sufficient they have given up to 12,000, and the rate of interest they have showed 850 but while time of payment they have cut 12,400 and 350 rupees balance left,so it was kind of confusion i have got, apart from that i did not face any issue in delay in loan or in documentation.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 15, 2018
    • Early Salary Personal Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I have been holding my personal loan with Early salary recently,the loan amount they have given me was sufficient they have given up to 12,000, and the rate of interest they have showed 850 but while time of payment they have cut 12,400 and 350 rupees balance left,so it was kind of confusion i have got, apart from that i did not face any issue in delay in loan or in documentation.
      Was this review helpful? 0
      , bangalore
      Reviewed on Nov 15, 2018
    • Axis Bank Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      It has been a good experience i had with the services of them. The loan amount which they had provided has been satisfactory and the interest rate with them has been nominal when compared with the market rate. There has been some charges which they had made initially for the processing fees.
      Was this review helpful? 0
      , chennai
      Reviewed on Nov 15, 2018
    • HDFC Bank Personal Loan
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I have holding my personal loan with HDFC bank for long time, the rate of interest they have charged me was nominal and processing fee was also nominal and i have not that much communicated with there support team , they provide less loan amount , overall service was average.
      Was this review helpful? 0
      , pune
      Reviewed on Nov 15, 2018
    • ICICI Bank Personal Loan
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have been holding my personal loan with ICICI bank, they have provided Excellent service, like i did not face any difficulty in documentation part they have given me loan amount up to 45,000, and they have charged rate of interest up to 14% it is nominal for me and they have charged processing fee up nominal even they said took charges for insurance from loan up to 5000, there service was good.
      Was this review helpful? 0
      , pune
      Reviewed on Nov 15, 2018
    • Bank Bazaar Personal Loan
      "Good service"
      0.5 5.0/5 "Blown Away!"
      I have been using BANK BAZAAR for while .Customer service was good and their response was on time. The website of bank bazaar is user friendly to use and is easy to navigate. The services provided by bank bazaar is good when compared to others in the market.
      Was this review helpful? 0
      , hosur
      Reviewed on Nov 15, 2018
    • ICICI Bank Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      My personal loan was taken with ICICI BANK , i got preclosere option with this bank , I ma not happy with the process it took much time to dispose the loan . They gave 5year of tenure period . They charge nominal interest rate but processing was too high with this bank .
      Was this review helpful? 0
      , hosur
      Reviewed on Nov 15, 2018
    • Bank Bazaar Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      I have been using BANK BAZAAR for while .The customer support response was very prompt . I bought a credit card from Bank Bazaar. The whole application process was easy and hassle free. BANK BAZAAR has been having a good user interface. I am very much happy with the website.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Nov 15, 2018
    • Tata capital Personal Loan
      "Good service"
      0.5 4.0/5 "Great!"
      My personal loan was taken with TATA CAPITAL , there were no hidden charges with this bank . They did not charge any processing fee and i got my loan on time . The loan amount which i got through this bank is satisfactory .I did not got nay paper work they said they will send on mail but not yet receive .
      Was this review helpful? 0
      , hyderabad
      Reviewed on Nov 15, 2018
    • Bank Bazaar Personal Loan
      "Best service"
      0.5 5.0/5 "Blown Away!"
      I have been using bank bazaar service for first time, i came to know about bank bazaar service through on line, have been using website for applying my personal loan and after that i had downloaded mobile application for tracking my details.
      Was this review helpful? 0
      , new delhi
      Reviewed on Nov 15, 2018
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