5 things to Know Before Signing as a Home Loan Guarantor

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Home Loan Guarantor

When helping a family member or friend in taking a loan for a home, there are certain terms that one should be familiar with. One of these terms is ‘home loan guarantor’.

Though not mandatory, a home loan guarantor is a non-financial or financial guarantor who is kept on record when taking a home loan. The Home loan guarantor is a secondary point of contact when the primary loan applicant cannot be reached. The guarantor is only an alternate contact for the loan applicant and is not financially responsible for repaying back the loan amount unless he is a financial guarantor.

A home loan applicant has to fulfill a long list of criteria before he can be eligible for a home loan. One of these criteria may be a home loan guarantor who is willing to underwrite for the loan that the applicant is taking.

A guarantor may be required under the following conditions:

  • The loan amount is over a certain limit that the bank has stipulated.
  • The loan applicant is financially weak and requires a guarantor.
  • The loan borrower has an imperfect credit history, yet is applicable for a loan.

Here are five things to know before signing as a loan guarantor:

Financial and non financial guarantor

A non financial guarantor only acts as a point of contact when the loan applicant cannot be reached. A non-financial guarantor is not liable to repay the loan.

Your obligations as a guarantor

A financial guarantor is obligated to pay up the loan outstanding and/or any dues created by the borrower, in case of a default. This rule is only applicable for financial guarantors and not non financial guarantors.

It affects your loan eligibility

As a guarantor represents the loan taker, it also affects the individual’s credit score. If a borrower has taken a loan of a certain amount this will also affect the ability of a loan guarantor to take a loan of his own in the future. Financial institutions will keep a track of the loan borrowers’ repayment and defaults and this will affect the credit score of the loan guarantor.

Duration of the loan

The loan guarantor is liable to be answerable to the bank until the loan has been fully repaid. For this reason, it is also important to consider the tenure of the loan that one is becoming a guarantor for.

Responsibility of the Guarantor

As in the case of a loan default, the bank is sometimes liable to claim the assets of the guarantor to release funds and repay the loan. This nullifies the losses of the lender. In case of death of the principal borrower, where the loan is not covered by insurance, then this rule is applicable in order to receive payments to foreclose the loan.

Hence, one should be well informed before becoming a loan guarantor.


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