Financial guaranty Insurance is designed for lenders. This insurance provides protection for lender from financial loss against a borrower failing to repay the loan. Financial guaranty insurance is being offered by insurance companies effectively and they act as a line of defense.
A lender is covered by an insurance policy from liability which results from the failure of the borrower to repay the loan. Losses are also covered by this policy from a decrease in interest rates to the disadvantage of the lender. Different types of loans may be covered by financial guaranty insurance, but generally mortgages or certain credit lines are not included by this policy.
Usually, this term guaranty is a word used to refer to legal obligation to cover or pay a loan or debt, if it is not repaid. Any type of loan can be covered by financial guaranty insurance policy in theory. There are some barriers on the coverage of particular kinds of loans, mortgages, and consumer credit in practice. According to place, these barriers change through out the world.
The main difference in this insurance policy is that lender purchases this insurance policy. Generally, many other loans related insurance policies are purchased by the borrower to cover themselves when they are unable to pay the loan amount. Financial guaranty insurance is taken by the lender to get coverage from the situation where the borrower is unable to pay the loan amount and there will be a little or no prospect of getting any assets to cover the losses.
Financial guaranty insurance is offered by some as the part of a range of products. It is offered by some other firms as their only business.