Loan Guarantor
Loans & CreditA loan guarantor is a person who agrees to repay a loan if the primary borrower defaults. The guarantor's credit score and income are checked by the bank and the loan appears on the guarantor's CIBIL record. Becoming a guarantor is a significant financial risk.
In detail
What happens to guarantor if borrower defaults:n1. Bank demands payment from guarantorn2. Default appears in guarantor's CIBIL report (damaging their own credit score)n3. Bank can take legal action against guarantor's assetsn4. Guarantor's own loan eligibility reduces (guaranteed loan counted as liability)nnRisks: guarantors are often asked by relatives or colleagues. If that person defaults, you are equally liable. Never guarantee a loan you cannot repay yourself.nnDifference from co-applicant: co-applicant jointly owns the asset (property). Guarantor has no ownership, only liability.
Real-life example
Suresh guaranteed his brother's Rs 12L business loan. Brother's business failed after 2 years, defaulted. Bank approached Suresh. His CIBIL score fell from 780 to 610 due to the default. Bank attached Suresh's FD of Rs 5L. He was liable for remaining Rs 9L. Took 4 years of legal battle and payment to clear.