Whether you have a bad credit score or limited assets to keep as collateral, you always require someone who can become your guarantor and help you get a credit facility. No bank/lender permits you if you apply for the loan without a guarantor.
However, finding a guarantor is a big challenge; hence, you must know everything associated with a guarantor before finding one.
Anyone who trusts you and can agree to prove your repayment commitment to the bank/lender! A guarantor will always back up your loan account and ensure no EMI is missed.
A guarantor loan means you can get a loan without paying a high-interest rate if you have a bad credit score or have no asset to put as collateral. Mostly friends and family members are the first preference to sign the agreement as a guarantor. However, there might be a third person who can become your guarantor.
Most banks/lenders ask for a guarantor if your credit profile does not qualify for the loan or the bank isn't convinced with your financial reputation. You usually get a high-interest rate if you request a loan with no guarantor. However, it's important to note that a few banks approve your loan request. Else getting a guarantor becomes mandatory to proceed with the loan approval.
Anyone can be a guarantor, including friends, spouses, or family members. In some cases, your coworkers or strangers can also be your guarantor. It's important to note that you and your guarantor must have a good relationship and trust the borrower.
The general eligibility criteria for being a guarantor include:
A guarantor doesn't need to have a regular income source. Instead, anyone with a better credit score and who is within your relationship can become a guarantor. However, before selecting a guarantor, you must know the answer to some commonly asked questions:
No, the guarantor does not need to be employed. Instead, they must be able to settle the EMIs in case the borrower fails to repay them on time. The EMI must be paid on time, regardless of what income source the guarantor uses to clear the dues.
Yes, you can consider any retired person as a guarantor. However, the retired guarantor must have financial potential to support the borrower in an emergency. The retired guarantor must have some income source (e.g., pension) that makes them capable of signing as your guarantor.
Yes, you and your guarantor can have a common address. If you live in a combined family and your parents agreed to become your guarantor, you will share the same address. The address of the guarantor doesn't have any impact on their eligibility. However, the guarantor must be a resident of India.
It's crucial that your guarantor read every clause and instructions mentioned in the agreement before signing. Hence, ensuring your guarantor can read/write the agreement (irrespective of the language) before signing is essential.
The reason behind this is that after signing the deal, the guarantor can't back out.
It entirely depends upon the lender/bank whether they accept a guarantor from another country. Based on the bank, you should note the eligible countries before considering a guarantor for your loan request. If you are unaware of the list, ask the bank support who can help you find the right path.
Often your partner or family member can be considered your guarantor. However, if you and your partner share finances, their soft credit check is done to ensure the partner can help you financially.
You can simply ask people known to you to become your guarantor. If the guarantor agrees, he/she will sign the document taking the entire responsibility of the loan in case the borrower fails to repay it on time.
If you cannot pay the EMI on time, the guarantor is liable to continue the loan repayment. Hence, ensuring that your guarantor has a straightforward financial plan is essential.
In case the borrower fails to repay the loan amount, the guarantor is responsible for ensuring the payments are being made on time.
To ensure the guarantor is aware of and satisfied with their obligations toward the loan, banks or borrowers inform the guarantor about everything associated with the loan account. Most bank representatives also educate you about the pros and cons of becoming a guarantor.
The most common reason for rejecting your guarantor is not meeting the standard eligibility criteria. However, many other reasons are associated with the rejection of your guarantor, below are the prominent ones.
There is actually no such limit to becoming a guarantor. However, becoming a guarantor means you are solely responsible for repaying the loan if the borrower denies or fails to clear the debt.
Signing as a guarantor for multiple loans means you have to pay for more than one loan that you have not consumed. It is more like a punishment that you are getting for a sin that you haven't made.
A guarantor must be the helping hand to a single borrower. It means a guarantor must not sign multiple agreements. A guarantor is only able to pay for a single borrower. Signing multiple agreements weakens your financial reputation and can make you a willful defaulter.
Hence, financial experts always recommend sticking to one loan.
A guarantor is never reached until the borrower is timely repaying EMIs without delay. However, a guarantor becomes responsible for clearing the borrower's debt if he fails to repay the overdue amount. If the guarantor fails to repay the loan amount, he will face trouble in getting loan approval for themselves.
Till the guarantor signs the loan agreement, you can change your guarantor and let the lender decide whether your guarantor is worth considering. However, after a guarantor signs your document, you and the guarantor have no option but to continue with the terms and conditions mentioned in the loan agreement.
If the guarantor fails to repay the dues, he will be termed as a defaulter; a remark that that reflects on his credit report.
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