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Who is a Guarantor for Home Loan?

To apply for and receive approval on your home loan application, it is important that you match the lender’s terms and conditions. Sometimes, you may be able to comply with all of the home loan eligibility criteria, but may also require a home loan guarantor to complete the process.

To understand further and answer questions such as, ‘Is guarantor required for home loan?’, and ‘How to check home loan guarantor eligibility criteria?’, read on.

A home loan guarantor refers to a third-party individual who acts as a guarantee for a mortgage, rental or loan agreement. The role of guarantor in home loan is that if the primary applicant defaults on a payment, the guarantor will become responsible for fulfilling the obligations, i.e., repay the borrower’s share.

Lenders typically ask for a housing loan guarantor when:

  • A customer’s requirement exceeds a specific limit
  • An applicant has a weak financial standing or poor credit score
  • An applicants has a history of defaults
  • The borrower is close to retirement and does not meet the minimum income criteria

How Will a Home Loan Guarantor Help Your Application?

A home loan does not normally require a guarantor. In instances of poor loan eligibility, wherein doubts are cast on a borrower’s ability to repay, lenders will ask for a guarantor in home loan. However, it is necessary to have a guarantor for loans disbursed to retired people. Hence, a borrower should opt for a suitable guarantor, such as a family member, relative or friend, and this individual should have a strong financial profile. It is also important to note that there are documents required for home loan guarantor, and lenders will require these at the time of application.

What is the Main Responsibility of a Guarantor in Home Loan Repayment?

Normally, a guarantor home loan is needed when you borrow a loan over a specific threshold. However, some lenders insist on one irrespective of the loan amount to safeguard their interests. Also, some require a guarantor only in cases of non-fulfilment of certain conditions by the applicant.

The primary responsibility of a home loan guarantor is to offer a kind of security or assurance on behalf of the borrower to the lender. In case of a default, the guarantor will step in and pay the missed EMIs.

Which Factors Need to be Considered for Becoming a Housing Loan Guarantor?

Loan guaranteeing can become an unfortunate circumstance if proper precautionary measures aren’t taken. When approached to become a guarantor, it is imperative to consider the borrower’s repayment capabilities.

Additionally, it helps to keep these important tips in mind before becoming a guarantor for home loan:

  • Evaluate the underlying risks
  • Reconfirm with the borrower about his/her current financial situation
  • Set up a contingency fund in the event of having to repay some or all of the loan amount
  • Read through the agreement and conditions thoroughly

Some of the other pertinent questions to ask are described in the table below.

Are you joining as a financial or non-financial guarantor? Lenders require a borrower to identify the guarantor as financial or non-financial guarantor. A non-financial guarantor is mentioned on record and is considered an alternate contact for the lender in case the primary applicant cannot be reached.
How does undersigning as a guarantor impact your loan eligibility? The extent of your liability as a financial guarantor equates that of the main applicant, from the point of view of the lender. Therefore, any default or late repayment by the primary borrower will adversely impact your credit score as well.
Are you financially secure and aware of the loan terms as a guarantor? You need to confirm your financial standing prior to becoming a guarantor. You must have the capability to make timely repayments in times of a default by the borrower.

With these pointers in mind, you can make an informed decision, as both a borrower and a guarantor. To minimise any issues during loan processing, choose the Bajaj Housing Finance Home Loan. The loan is loaded with features to help you enjoy a comfortable and convenient experience. With it, you can avail a sizable sanction and fund the purchase of your dream home easily. You can opt for a tenor that ranges up to 30 years and repay at a competitive home loan interest rate for maximum savings.

For quick and easy access to these home loan benefits, and more, apply online by sharing basic personal information.

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