The number of personal Loans disbursed by numerous lenders has grown by 140 % within the last financial year, creating it the foremost popular loan product amongst millennials. The success of the financial product within the market is essentially attributed to its most vital feature of being unsecured or ‘Collateral-free’.
Personal Loan Guarantor
It is a matter of the fact that online personal loans are considered to be one of the most unsecured types of loan. This is the reason that banks do not ask for any collateral deposit and guarantor as well. In some instances, banks can be interested in keeping a guarantor if they feel that the applicant is not financially stable to repay the loan. As per the rules and regulation governing loans, the guarantor is liable to compensate the loan amount along with the chargeable interest to the bank if at all the applicant fails to pay back within the stipulated time allocated.
Duties of a Guarantor in General
A guarantor is just a person who witnesses the overall procedure and stands for the authenticity of the applicant. He takes charge of the timely repayment of the loan. In some cases, if the applicant confronts a premature death, then the bank is liable to collect the remaining amount from the guarantor. Banks may ask for a guarantor in order to have a double surety of the repayment for the money they are lending in terms of the loan.
Scenarios when Banks can ask for a Guarantor
- The credit history of the loan applicant is not satisfactory
- Unstable employment status of the loan applicant
- Frequent job switching and transfer from one city to other
- The income of the loan applicant is not stable
- The poor academic upbringing of the applicant
Who can be a Guarantor for a Personal Loan?
Banks and NBFCs have their own guidelines for nominating someone as one of the guarantors for the personal loan they are giving to customers. In most of the cases, banks prefer individuals as guarantors who have got a steady income and satisfactory financial stability. These norms are followed strictly in order to have a clear picture of the repayment scenario from the guarantor if the loan applicant fails to repay the loan within the repayment tenure.
Requirements for a Guarantors
Some of the basic and most common requisites of a person who can be termed as one of the guarantors are as follows:
- The guarantor must be 18 years old
- He must possess a satisfactory credit history
- He should be mentally fit and sound
- He should be able to understand the responsibilities of a guarantor
- He should possess a good influence over the loan applicant, so that he may be able to influence him to pay the personal loan in time.
- The guarantor should not be chosen by the loan applicant forcefully
- Banks allow the guarantor to seek legal advice before signing the documents
- The guarantor must be aware of the financial condition of the loan applicant, and he should also have a clear understanding of the applicant’s outstanding personal loan, gratuity amounts, and provident funds.
It is highly recommended to go through the guidelines of the banks and NBFCs before signing as a guarantor. If you are not aware of the consequences, then you may fall into trouble if the borrower doesn’t fulfil his duties properly.
