# How to Place Guarantee Funds On-Hold?

When specifying guarantors for a loan, this feature allows user to specify what amount of the loan the guarantor stands as guarantee.

There are 2 types of guarantees:

&#x20;   **Own Guarantee**: One or more of own deposit accounts can act as guarantee.

&#x20;   **Others Guarantee**: One or more of other clients/members and their deposit accounts can act as guarantee.

### **Description:**&#x20;

* Loans are linked to savings account and savings amounts are blocked.
* The amount of guarantee becomes blocked (on-hold funds) - i.e. client cannot withdraw this amount but will continue to earn interest.
* If another member stands as guarantee, then funds can be clocked for savings account.
* As the loan gets repaid, the blocked funds get "released" (i.e. available for withdrawal) accordingly.
* Guarantor may belong to same group or may be outside the group. On agreeing to be a guarantor, a part of his/her "available funds" can be specified as guarantee and this amount gets "blocked".
* Guarantor funds gets "released" first, before loan account holder's funds are "released".
* If loan is rejected, then all guarantees for this loan are released.

### Step 1:&#x20;

**Enabling "Place Guarantee Funds on-hold?"**&#x20;

Go to Admin>>Loan Product>>Create Loan Product.

![](https://mifosforge.jira.com/wiki/download/thumbnails/85623288/7ty.png?version=1\&modificationDate=1420392392946\&cacheVersion=1\&api=v2\&width=600)

### Step 2:&#x20;

**Linking Savings account to the Loan account**

Client>>New Loan application>> Select Savings account to link to loan account.&#x20;

<div align="left"><img src="https://mifosforge.jira.com/wiki/download/attachments/85623288/pu.png?version=1&#x26;modificationDate=1420393474666&#x26;cacheVersion=1&#x26;api=v2" alt=""></div>

### Step 3:&#x20;

In the Provided example, Loan application is being created for Anna White for a Loan amount of 10000 US$.

Percentage amount needs to be calculated manually outside the Mifos X.

Since here,

a) Guarantee from Own funds is 40% of the Loan amount, that will be 4000 US$.

b) Guarantee from Guarantor funds is 20% of the Loan amount, that will be 2000 US$.&#x20;

**Note:** This amount needs to be input in the amount field initially with respect to the Guarantee's.

**Create Guarantor**

In the Loan application page>>More>>Create Guarantor

![](https://mifosforge.jira.com/wiki/download/thumbnails/85623288/up.png?version=2\&modificationDate=1420394094716\&cacheVersion=1\&api=v2\&width=850)

a) Creating Guarantor for Own account and providing amount to block the funds from savings account.

![](https://mifosforge.jira.com/wiki/download/thumbnails/85623288/gn1.png?version=2\&modificationDate=1420448479072\&cacheVersion=1\&api=v2\&width=450)

b) Creating Guarantor for Other guarantees and providing amount to block the funds from savings account.

![](https://mifosforge.jira.com/wiki/download/thumbnails/85623288/gn.png?version=1\&modificationDate=1420447368818\&cacheVersion=1\&api=v2\&width=450)

### Step 4:&#x20;

Then Approve the Loan & Disburse.&#x20;

**Recovery from Loan:**&#x20;

&#x20;This enables recovering of provided percentage loan amount from Guarantor through linked savings account.&#x20;

![](https://mifosforge.jira.com/wiki/download/thumbnails/85623288/q1.png?version=1\&modificationDate=1420457360176\&cacheVersion=1\&api=v2\&width=800)

**Funds getting released:**&#x20;

Once the Repayment start happening. The funds gets released automatically for savings account with respect to the provided percentage. Note: Guarantor funds gets "released" first, before loan account holder's funds are "released"

**Withdrawing amount from savings account**

Here In the image below, on trying to withdraw the set percentage, it will throw an error message as "Insufficient funds to complete the transactions."&#x20;

<div align="left"><img src="https://mifosforge.jira.com/wiki/download/thumbnails/85623288/wit.png?version=1&#x26;modificationDate=1420451768425&#x26;cacheVersion=1&#x26;api=v2&#x26;width=400" alt=""></div>

**Reference Link:** Guarantor Amount Capture and Blocking/On-Hold of Funds in Guarantor Accounts

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