WHAT THINGS TO CONSIDER BEFORE BECOMING A GUARANTOR IN PERSONAL LOAN

A personal loan does not require anything to put up as a collateral deposit in the form of security. This makes the personal loan unsecured. Therefore a good CIBIL credit score is very important to get a personal loan. But before approving the loan application, the lending institution may ask for a guarantor who will make good of the loss in case the borrower makes defaults. It is the Bank's way of ensuring money is in safe hands and it will be duly repaid on time. The loan amount must be repaid in monthly instalments, which can be calculated with the help of a Personal loan emi Calculator.

There are numerous reasons why banks ask for a guarantor like a borrower’s credit score does not meet b requirements, if the borrower is doing a transferable job, if there is job's instability from the borrower's end if the income of the borrower is unstable and he has a poor academic background. Moreover, the requirement of a guarantor can be a part of the lending parties rules and regulations. This makes the guarantor a mandatory part of loan approval. A guarantor becomes personally liable for the personal loan taken equally like the principal borrower. This means to consent to the Bank to be a guarantor will put a financial burden on the guarantor, as he will be the backing the borrower in case of default. In case of default of the principal borrower the banks usually send a notice to the guarantor to clear the outstanding loan amount. If the guarantor fails to do his job, the Banks treat him as a wilful defaulter. This can seriously affect the credit score and credit rating of the guarantor.

Before Becoming A Guarantor A Person Should Take These Factors Into Consideration:-

• It does not matter for whom he is choosing to be a guarantor but he must always check his creditworthiness before appearing as a guarantor for him. If the borrower has a stable monthly income, there are no issues to become a guarantor.
  
  
• People who are planning to apply for a loan for themselves should not choose to be a guarantor for someone else. This can affect the eligibility of the loan that the guarantor wants to take.
  
  
• Additionally, the guarantor must know why the borrower wants him to become a guarantor. Mainly, the borrower’s poor credit score is why the lending Institutions ask the borrower to get a guarantor against a Personal Loan.
  
  
• Before consenting to be a guarantor one must have a contingency plan. The personal loan amount should be within the repayment capacity of the guarantor because if the borrower does any default,  the burden is entirely upon him.
  
  

A guarantor is an additional layer of security for the creditor. Understanding the financial and non-financial implications of a personal loan is very important for a guarantor. The financial liability that a guarantor and principal borrower has is almost equal. Therefore the legal obligation to collect the outstanding money from the guarantor is a right that the lending institution has if the principal borrower fails to pay the loan amount. In case of default, the guarantor’s monthly income and other assets can be attached to the loan liability. Axis bank personal loan status or the personal loan status provided by other banks can help the principal debtor as well as the guarantor to understand the position of personal loan application done. Being a guarantor is not a bad thing but one must keep in mind a few factors before becoming a guarantor. A particular loan product must be chosen after doing thorough research. The above-mentioned points can help a guarantor to understand the credibility of the borrower and thereby choose whether he wants to become a guarantor for him or not.

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