Banks and Housing Finance Companies (HFCs) request guarantors for home loans only when the amount you apply for is above the set limit or when you have a low credit score or a poor credit history. To release the loan amount under such conditions, you must provide a guarantor who meets the lender’s home loan eligibility criteria.
A home loan guarantor is neither a co-borrower nor do they pay money to become a guarantor. There are two kinds of home loan guarantors—non-financial and financial home loan guarantors. A non-financial home loan guarantor is not liable for any missed Equated Monthly Instalment (EMI) payments. However, a financial home loan guarantor takes over the loan repayment if you default.
Read on to learn more about who a home loan guarantor is, what is the role of a guarantor in a home loan, and more.
A home loan guarantor is someone who agrees to be responsible for you throughout the home loan tenure. If you default, the guarantor steps in to continue the payment. Do note that this only applies to financial guarantors.
To meet the home loan guarantor eligibility, you must be financially stable. One of the rules for a home loan guarantor is that you must be prepared to take over the home loan EMI payments if the applicant defaults at some point.
When you meet the lender’s requirements, you qualify for the role of a guarantor in a home loan.
To become a home loan guarantor, you must provide certain documents as required by the lender. These documents are:
You will also state your relationship with the loan applicant and provide a statement of your assets and liabilities.
Before agreeing to the role of a guarantor in a home loan, ensure that you consider the following factors. They are:
If the home loan applicant misses a payment and can no longer pay, you are responsible for the outstanding payments. This becomes legal once you sign the home loan guarantor papers.
However, only financial guarantors are required to pay the remainder of the home loan amount. Also, as a financial home loan guarantor, you will repay the interest component on the missed home loan EMI payments.
When the loan applicant defaults, it negatively affects your credit score and history. It portrays you as a financially unstable individual and reduces your chances of getting future loans.
Even though the home loan has been repaid, the applicant has not legally closed the loan. To close the loan and be officially debt-free, the lender must issue a NOC confirming that you have completed the home loan EMI payments.
Bajaj Housing Finance offers high-value home loans at the lowest possible interest rates. Applying for a Bajaj Housing Finance Home Loan assures you of numerous benefits like incredible home loan tax benefits, loan tenor of up to 30 years and many more. We also offer the home loan balance transfer option. Click here to begin your application now.
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Last update on 11-Mar-2021
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