A personal loan is an unsecured type of credit granted by the financial organizations in adverse as well as pleasant times to the individuals or entities to meet their personal needs. This credit facility neither demands any security nor does it ask for complicated paperwork and documentation. When the lending institutions (banks and non-banking financial companies) sanction a loan amount, they consider a lot of factors and they thoroughly assess the risk they would assume if they extend the loan. The levels of risk the lenders perceive determine if they are comfortable while granting the loan amount.
Usually, a financial organization will not expect the applicant to involve a guarantor but the stake is high for both the parties to be involved in the transaction then the lender will allow and request the applicant to consider the option of the guarantor. A guarantor is an individual or entity who takes a guarantee on behalf of the applicant and assumes the responsibility in case of default made by the applicant. The guarantor will clear all the liabilities of the primary party involved in the loan agreement if there is a default made.
Guarantors (underwriter) is added to the credit application process to enhance the credentials of the applicant. A guarantor does not only become the witness of the credibility of the applicant but also guarantees that the applicant will pay off the loan amount dutifully.
An underwriter can be anyone from the individual or entity’s family, friends, or loved one. The individual or entity must have this in their minds that a guarantor must be someone they trust and can easily rely on. The applicant’s spouse or parents can be a part of this. The guarantor is also the co-applicant. There is no hard and fast rule that specifies the type of guarantor an individual or entity can involve. The person who takes a guarantee on behalf of the applicant must satisfy the basic age requirement that is he/she must be a minimum of 21 years of age and have a stable source of income. The credit of the person taking the guarantee has to be as per the standard of the lending financial institutions (banks and non-banking financial companies). Bajaj Finserv personal loan requires the credit score to be 750 and above.
Besides these basic requirements that individual applying for the personal loan needs to sure that the underwriter has not been forced or coerced in any way to apply with them for the credit facility. The rights and responsibilities must be explained to the person beforehand. The guarantor must be a competent personal who in the eyes of law is allowed to enter into or sign a legally valid loan contract.
The person taking guarantee may prove to their loved ones that they are there for them always but guarantors need to be aware of the aftermath of getting into a personal loan agreement. The person taking the guarantee must check before the estimated cost of the sing the instant personal loan EMI calculator to be aware of the monthly installments and he/she should go through all the related details before agreeing to sign the loan contract.
Any wrong step taken by the primary applicant after the credit has been advanced will negatively impact the underwriter as well. The credit score of the person being a part of this will deteriorate temporarily and if the applicant does not make prompt payments then their score may sustain some long term damage. The entire obligation in such a scenario will have to be settled by the person who has signed as the guarantor. The financial organizations whether it is a bank or non-banking financial institution, wait for a few months before they intimate the person who has taken a guarantee to look after the dues. Once the waiting period lapses, then the liability shifts to the guarantor and the dues along with the penalty has to be taken care of. In case they deny the take-up responsibility, the financial institutions will consider them as ‘wilful defaulter’ and legal actions will be taken against them along with the primary applicant.
Before involving any person to the personal loan agreement, it is very important for all the parties to be involved to consider all the actions to be taken along with their outcome.
Dialabank is India’s first financial helpline with services available in various cities. To know anything related to the personal loan, an individual or entity can easily go to Dialabank’s website, check out all you need to, and find the appropriate policy without any hassle.
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