Becoming a home loan guarantor for family members or friends is a crucial decision that can affect an individual in the long run. Hence, it is vital to consider some essential factors before accepting this offer to safeguard oneself in the future.
7 Things to remember before becoming a housing loan guarantor
Below are seven things that individuals must keep in mind prior to becoming a home loan guarantor:
- They must go through all the rules that the financial institution has set for that role for compliance.
- If a borrower is unable to repay the loan on time, the credit score of the guarantor also reduces considerably.
- Financial institutions approach the guarantor to repay the loan in case the borrower defaults.
- In case a guarantor, too, is unable to repay the role after the borrower has defaulted, financial institutions will tag them as a ‘wilful defaulter’.
- Once an individual becomes a guarantor, the loan is reflected in their credit report as well unless the borrower fully pays it off.
- Becoming a guarantor can affect an individual’s creditworthiness when they approach a financial institution for a home loan to meet their financial urgencies.
- It is essential to check the pros and cons before agreeing to become a guarantor for a friend or family member.
It is essential to keep these pointers in mind before becoming a home loan guarantor. Additionally, individuals must also check the eligibility and documents required before proceeding.