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Loan Guarantor Rule: Know this before becoming someone's loan guarantor, otherwise you will have to pay 100 percent..

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Let us tell you that a guarantor is a person who agrees to be responsible for the payment of another person's loan. If the loan taker does not repay the loan, then the guarantor will have to repay the loan. Becoming a guarantor is not just a formality to help the borrower. The loan guarantor is as responsible for repaying the loan as the loan taker.

And for your information, let us tell you that if you become a guarantor, then the bank also considers you a borrower. By becoming a guarantor, you come under many types of financial rules. When the loan amount exceeds the minimum limit, then the bank asks to bring a loan guarantor. There are no fixed guidelines for this and every bank has different rules for loan guarantors. Therefore, before becoming a loan guarantor, it is important to understand all the terms and conditions.

Keep these things in mind before becoming a guarantor:-

1. There is a difference between a loan guarantor and a co-borrower
It is wrong to think that the terms co-borrower and loan guarantor are used together. A guarantor comes into play only when both the borrower and the co-borrower are unable to repay the loan. The bank believes that recovery will not be possible due to certain circumstances.

2. A good credit score is a must for a loan guarantor
Your credit score plays an important role in becoming a guarantor. Your financial credibility is checked as per the criteria of credit score. When you apply for a loan, banks also take into account the loan amount guaranteed by you. Which reduces your chances of getting a loan. Additionally, any default or irregular payment of EMI by the primary borrower can make your credit score negative.

3. Legal action can be taken if the guarantor refuses to pay
If the main borrower becomes disabled due to some reason or dies, then the bank can contact the guarantor to repay the outstanding loan amount. If you are a guarantor for a home loan, you can request for recovery of the amount by selling the property. The bank can also take legal action if you refuse to repay the loan. In most cases, the bank can demand possession of your property to recover its outstanding amount.

4. You cannot back out of this responsibility after becoming a guarantor
Once you agree to become a loan guarantor, it is difficult to back out of the responsibility. The process of relieving the guarantor from the responsibility requires a request to both the bank and the borrower. The bank approves the change only if another loan guarantor is available.

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