Mortgage loans are typically high-value credit options and require well-thought-out decision making to avoid future issues. As a part of this process, one needs to arrange a mortgage loan guarantor to improve his/her eligibility.
Finding a guarantor can depend on a host of factors; at times, it is the policy of a financial institution or if one has a low CIBIL score and likes. Nonetheless, before agreeing to such a responsibility, one must consider a few facets and make an informed decision.
5 points to check before agreeing to become a mortgage loan guarantor
Here are five points that individuals should consider before agreeing to become a guarantor for a mortgage loan ?
- The type of guarantor you will be
The first point to review here is whether one is a financial or non-financial guarantor. In case you sign as a financial guarantor, the lender will take your financial documents.
However, if you are a non-financial guarantor, in that case, you need not submit any document. Instead, the lender will only contact you if they cannot reach the primary debtor.
Hence, you need to make a decision depending on how well you know the borrower applying for credit.
- Understand the obligations of being a guarantor
Since financial guarantors are obligated to repay the loan outstanding if the primary debt falters, you should consider this factor before agreeing. Also, you should know that if you fail to repay as well, you will be marked as a ?wilful defaulter?.
- It will affect your own eligibility
Another factor to consider before agreeing to become a mortgage loan guarantor is that it will affect your eligibility criteria. In case you end up repaying for the primary borrower, it will affect not only your finances but also your credit score and repayment history.
Additionally, if you need credit in future and your credit profile is not up to the mark, your chances of securing a credit will also reduce.
- Understand how the tenor can hinder your progress
Besides the eligibility factor, customers should also understand how a loan tenor can affect their finances. Guarantors remain liable till the loan is repaid, and they need to seek a no-objection certificate (NOC) after it ends, relieving them from this duty. After this, the process will be completed.
- Whether you are financially secure to take up this responsibility
Last but not least, you must evaluate your financial stance before taking up this responsibility. Since you will have the onus of repaying the remaining credit in case of a default, you will end up hurting your credit profile if you are not financially stable.
Also, be wary of all the terms and conditions of a loan before signing any document.
Now that you are aware of the points to consider before becoming a mortgage loan guarantor, you should also know the reasons behind the requirement of a guarantor.
Conditions that require a loan guarantor
Following are some conditions where you need a guarantor to avail a loan against property or any other mortgage loan ?
- If you have applied for a loan amount that is beyond your lender?s provided limit as per its policies
- If you have a poor repayment history
- If you are involved with a high-risk job
- In case you cannot meet the loan against property eligibility criteria
- In case your age is closer or over the upper limit set for a LAP
Furthermore, you can avoid the hassle of a loan application with pre-approved offers in some cases. Leading financiers extend this facility to streamline the loan application process and save time. These are available on a variety of secured and unsecured financial products. You can check your pre-approved offer online by submitting your name and contact detail.
Becoming a?mortgage loan guarantor?can be a risky move if not planned correctly. Therefore, go through the associated terms and conditions and learn the pointers to check before applying to make an informed decision.