Can someone’s loan be removed after becoming a guarantor, know the rules

Loan Guarantor: If you are going to become someone’s loan guarantor, then first you should know some important things. Many times people become their guarantors without any knowledge on the behest of any of their relatives or friends. It is wrong to do so. The decision to become someone’s guarantor should be taken after careful consideration. Know what are the rules regarding this.

borrower and guarantor

  • The guarantor is also equal to the borrower of the loan.
  • In the event of a default, banks first send a notice to the borrower, if the answer is not received, then they can also send a notice to the guarantor.
  • Although the bank recovers from the borrower itself, but if this does not happen, then the guarantor will also be held responsible for the default.

Do all banks insist on a guarantor?

  • Not all banks insist on the guarantor.
  • Banks do this when they feel that the guarantee is not sufficient and they doubt the ability of the applicant to repay the loan.
  • It is necessary to have a guarantor for large amount loans.

impact on credit score

  • CIBIL also maintains the record of the guarantors.
  • The loan guaranteed by you will be deemed to have been taken by you.
  • If the borrower does not repay the loan, then your credit score may deteriorate.

trouble getting loan

  • Being a guarantor may make it difficult for you to get a loan in future.
  • The amount you guarantee appears on your credit report as arrears.
  • If the person from whom you have taken the guarantee is not repaying the money then you may find it difficult to get the loan.

What to do before becoming a guarantor

  • Be the guarantor of the person you know well. Know about the person’s financial condition and find out if he has been a defaulter in the past.
  • If you are already a guarantor, get in touch with both the borrower and the lending bank.
  • The guarantor should check your credit score regularly because if there is any problem, it will be reflected in your score.
  • Ask the person of whom you are going to be the guarantor to buy the loan insurance cover.

Can I be removed as a guarantor?

  • Banks do not allow this until the borrower finds another guarantor.
  • Even after getting a second guarantor, it is up to the bank whether he allows it or not.

What to do in case of default?

  • You can repay the loan by talking to the borrower.
  • The guarantor can recover the money from the borrower at a later stage.

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