Guarantor’s Liabilities in Case of Home Loans in India

Institutions disbursing loans in India usually ask for a guarantor. It is no different in the case of home loans in India. The borrower must furnish a guarantor. If you are asked to become a guarantor, understand the liabilities before you sign.

According to law if the borrower does not repay the loan or dies, and if his heirs refuse to repay, the lender will exercise his right to claim the oustanding from the guarantor.  If the borrower defaults four consecutive EMIs the bank sends a notice to the guarantor. Before coming to this stage the bank will usually request the guarantor to follow up with the borrower, if he is alive, and get him to pay up. If he is deceased the guarantor may be asked to persuade the heirs to pay. If default continues the bank may institute legal proceedings for recovery against borrower and guarantor. If the borrower or his heirs default, invariably the guarantor has to pay. The financial burden, especially in case of home loans, can be huge and what is worse, the guarantor gains nothing in the process, not even right to the property.

Before becoming a guarantor you should make sure the borrower has the capacity to repay and that his heirs can be trusted to take up the loan EMI repayment on his death.

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