Did you know these loans require a guarantor?
What's the story
In India, many loans require a guarantor to secure them. A guarantor is someone who agrees to repay the loan if the borrower defaults. This is especially important for those with limited credit history or income. Here are five loans in India that typically require a guarantor, providing insight into how they work and why they are needed.
#1
Personal loans with guarantor requirement
Personal loans are unsecured loans that can be used for various purposes, such as medical expenses or travel. However, many lenders require a guarantor to mitigate their risk. The guarantor becomes liable if the borrower fails to repay the loan. This requirement is common for individuals with low credit scores or insufficient income proof.
#2
Education loans needing a guarantor
Education loans in India often require a guarantor, especially for higher amounts and foreign studies. The guarantor is usually a parent or relative who can provide financial stability. This helps lenders feel more secure, knowing someone with a reliable income backs the loan. The requirement is especially important for students without a steady income or credit history.
#3
Home loans requiring a co-signer
Home loans in India often require a co-signer or guarantor, especially for first-time buyers with limited credit history. The co-signer shares the responsibility of repayment, giving lenders confidence in the borrower's ability to repay. This is crucial for those unable to meet minimum income criteria on their own.
#4
Vehicle loans with guarantor stipulation
Vehicle loans also commonly include a guarantor clause, particularly for higher amounts or longer tenures. A guarantor helps secure better terms by reducing lender risk. This is particularly beneficial for borrowers with lower credit scores who might otherwise face higher interest rates or unfavorable conditions.
#5
Business loans needing personal guarantees
Business loans frequently ask for personal guarantees from business owners or their family members as collateral against default risks. These guarantees ensure that personal assets can be claimed by lenders if businesses fail to repay debts as per agreed terms and conditions laid out during initial agreements between parties involved in transactions related thereto.