Guarantor

A Guarantor acts as a backup for the lender, providing assurance that the loan will be repaid even if the borrower defaults. The guarantor does not receive the loan amount but is legally responsible if repayment fails.

Banks follow lending guidelines set by the :contentReference[oaicite:0]{index=0} when accepting guarantors.

Key Features of a Guarantor

• Takes legal responsibility for the loan
• Improves borrower’s loan approval chances
• Must have a good credit score and stable income
• No direct benefit from the loan

Responsibilities of a Guarantor

• Repay loan if borrower defaults
• Ensure borrower follows repayment schedule
• May face legal action if dues are unpaid

Risks for Guarantor

• Negative impact on credit score
• Financial liability for the entire loan
• Can affect future loan eligibility

Guarantor vs Co-borrower

• Guarantor: Pays only if borrower defaults
• Co-borrower: Shares responsibility from the beginning

"A parent becomes a guarantor for their child’s education loan. If the child fails to repay, the parent must repay the loan."