All About Personal Loan Guarantors
A personal loan is an unsecured loan which offers you an option to get the funds without keeping any collateral or security. But in some cases, the financial institutions might ask you for a guarantor before they approve your application. So, if you are planning to be one of those guarantors, there are a few things that you should know very well. So, in here you will get along all the related terms and specifications about being a loan guarantor.
Why Do The Banks look For A Loan Guarantor?
A personal loan is an unsecured loan, so the question arises why the banks look for a loan guarantor? So here are a few reasons for this:
- In case the borrower’s financial status fails to meet the requirements, the bank asks for a guarantor.
- If the borrower has had an unstable employment history or is prone to transfers now and then, a guarantor is needed in such a case.
- Job stability is not up to expectations.
- Undefined or unstable income of the borrower often raises a question on the capability of loan repayment.
Thus, if there is any doubt in the capability of loan repayment by the primary loan borrower, the banks want to have a stable option or person to whom they can go. Thus, they look for a guarantor.
What Is The Role Of A Personal Loan Guarantor?
A loan guarantor is a person for whom the banks ask for when they are not comfortable or unsure about the primary loan applicant’s current financial strengths. The bank wants to make sure that the repayment of the loan is done in time and without any future complication, thus they look for a guarantor.
So, remember if you are agreeing for being a loan guarantor, you definitely have a crucial role to play. In general, you are making a financial commitment to the bank and the primary loan applicant. The repayment of the loan is the guarantor’s responsibility if in case the borrower fails or chooses not to do so, which indeed is a huge responsibility.
Eligibility For Being A Guarantor
If any individual wants to be a personal loan guarantor, there are few obligatory legal conditions. There are:
- A sound credit history is a major requirement.
- Must not have applied for any bankruptcy before.
- The guarantor must be a minimum of 18 years at the time of loan sanctioning.
- The individual should not be forced or pressurized for signing the agreement and must be told about all the rights and responsibilities before the agreement is signed.
- The individual must have sound mental stability while signing the agreement and must be aware of all the ifs and buts.
- The individual must have all the information related to the borrower’s outstanding loans, EMIs, the rate of interests, tenure, etc.
- After the loan has been approved, the guarantor must be given a copy of the loan agreement.
What Are The Consequences?
If in case the borrower fails to repay the loan, the whole-sole responsibility of the repayment lies with the guarantor. So, make sure you are ready for this consequence.
Your future loan eligibility reduces if you agree to become a loan guarantor.
The credit history of a loan guarantor is certainly affected, and this again reduces future loan eligibility.