A guarantor is needed when the actual borrower's financial status is poor. By keeping a borrower, when the borrower fails to pay the monthly repayment, then the guarantor is obliged to fill his defaults. ICICI Personal Loan provides top services when it comes to the personal loan.
So, a guarantor is not just an onlooker or someone who proves the legitimacy of the borrower. Instead, she guarantees that the person will payback. And in case the borrower doesn’t, then he or she will be held responsible for the same.
A few rundown wherein banks may request for a guarantor:
The borrower’s credit health does not keep up with the bank’s.
The is employment is unstable with chronic transfers to different cities.
Job stability is a problem.
Unstable income brings a pile of the doubt when it comes to repayments.
Low academic background.
There might be different reasons as well. For example, the prerequisite of a guarantor might be a piece of the loaning gathering's guidelines and rules. Additionally, not every person can turn into a guarantor for a Personal Loan. There will be sure standards indicated by monetary foundations which a guarantor should meet.
Most financial institutions, i.e banks and loan lenders have their internal norms regarding who can become guarantors. Usually, they would prefer the guarantor to be an individual with an unshakeable income (this should ideally be more than that of the principal borrower). Along with that, lenders will always bend towards an individual whose credit score is better than the borrower for the same reason for lending money. Some lenders may insist that the guarantor and borrower must be working in the same organization so that if they both fail then they can approach both of them in the same organization. Requirements : Few of the general requirements and mandatory requirements are.
Guarantor’s age must be at least 18 years of age
The person should have a good repayment history and should not have applied for bankruptcy ever before. Personal Loan Interest Rate can be used to know the interest rates.
Guarantors should be level headed with learning ability, intelligence, brainpower and be able to understand their responsibilities before signing the agreement.
They should have a handful of influence over borrowers so that they influence them to make payments in time throughout their tenure.
The individual should not be forced, pressured to sign in for the position of a guarantor.
Guarantors should have the right to ask for any legal opinion before signing the agreement.
The guarantor should be made aware of the borrower’s outstanding loan, their collected gratuity and provident fund if applicable, details of the loan being applied for, which includes details such as loan amount, the rate of interest, the EMIs to be paid and its tenure.
The guarantor before they sign the agreement, lenders should explain what the rights and responsibilities in legal terms are.
A copy of the loan agreement should be given to the guarantor, as legit proof.
Consequence Of Signing Up As A Guarantor
It’s a good thing to be kind-hearted, but when you come to a guarantor out of these emotions, this can backfire.
An example: Ms. Rajshree is a kind soul working at an MNC in Mumbai and earning around Rs. 25 lakhs annually. She is someone, who you could say, successful in the life cycle, having achieved great success both in his professional and personal life.
Anyway, here is the tragic incident that happened in her life. Her little brother wanted a loan of Rs. 20 lakhs for his son’s wedding. But the bank needed a guarantor for the loan. Her brother approached her. Rajshree, knowing the financial condition of her brother and being the good-hearted man that she is, agreed to become a guarantor.
Three years later, Rajshree received a call from the bank demanding that he repay the loan amount borrowed by her brother since she is the guarantor.
Conclusion: When a person sets to become someone’s guarantor then he/she will have the responsibility of paying back the money that the actual borrower owned to the bank. When deciding to become a guarantor, think carefully.
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