Whenever someone needs a loan, a guarantor is required to take the loan from the bank. To become a guarantor, one has to follow many rules. Let us know about it in detail.
If you become the guarantor of someone’s loan, then you also have to sign many documents. Therefore making a guarantor is not just a formality. If the person taking the loan is unable to repay the loan amount, a notice may also come to your home. Therefore, it is very important to know the rules before becoming a guarantor of someone’s loan.
Big responsibility on the guarantor
Banks or any financial institution mostly do not give loans without a guarantor. The guarantor of the loan carries a huge responsibility. If the person taking the loan is unable to repay the loan, then legally the guarantor is responsible for repaying it.
According to Yes Bank website, a guarantor is someone who agrees to pay someone else’s loan. Being a guarantor is not just a formality to help the borrower but the guarantor is equally responsible for repaying the loan. However, each bank has made different rules for guarantors.
equal debtor
According to the rules, a person who guarantees a loan to someone is an equal debtor to the borrower. In case of default, the bank first sends a notice to the loan borrower. If no reply is received, the bank sends a notice to the guarantor along with the borrower. First, the bank makes every effort to recover the money from the borrower, but if he is unable to repay, then the guarantor is also considered responsible for the default.
Why is a guarantor needed?
However, banks do not look for guarantors on all types of loans, but when they are not able to get sufficient documents and the bank feels that the person taking the loan will not be able to repay it, then in this situation they ask for a guarantor.
If someone is taking a loan of a large amount, then a guarantor is required for it. Therefore, it is very important to know all the rules before becoming a guarantor for anyone.
The guarantor may face problems
Our credit score plays an important role while becoming a loan guarantor. Your credit is checked as per the rules. For example, if you have taken a loan from the bank, then what is the status of its EMI.
If you are using a credit card, are you paying your bills on time or not? If the person taking the loan is unable to repay it, your credit score will also get spoiled. Then whenever you go to take a loan, you may have to face problems.
