How You Can Quit As A Loan Guarantor

It is not very easy to wriggle out of your role as a guarantor in case the original borrower defaults. Nevertheless, you can still come out of the situation.

Becoming a guarantor for a loan is a huge responsibility. It means you are providing a guarantee to the lender that you will repay the debt of the borrower if he is unable to do so if such a situation arises. But what if you decide, after some time, that you want to be relieved? This is a situation that is difficult to wriggle out of, but to cut the long story short, it may still be possible, subject to some tough conditions.

 When you decide to opt out, you will have to approach the lender directly with an application. Unfortunately, the discretion is solely dependent on the lender, whether or not it will let you go. The bad news is that, in the face of rising bad loans that crippling the banking industry, the lender may not be willing to relieve you. This is because it has probably tried all the ways and means to get the borrower to pay up her/his debt and failed. The good news is there are some circumstances under which you may be relieved.

An additional loan is granted without your consent: If you find that the borrower has taken an additional loan over the original amount that has been sanctioned without your consent, you may ask the bank to relieve you. However, you will still be liable to repay the outstanding on the original amount sanctioned.

A substitute guarantor for the loan: You may also approach the bank with an application for a release if there is a substitute guarantor for the loan. If the bank is really convinced why you are opting out and is convinced about the credentials of the substitute borrower, it may set you free.

Get the borrower to pay back: This seems a little farfetched, as you would not have to bother about opting out if the borrower was making timely repayments and had intentions of paying up the entire debt within the stipulated timeframe. However, you can indeed give this a shot. If you have been a guarantor for someone’s loan, it is obvious that you know him/her very well. Try to make him/her see reason and help him/her out as much as you can to repay the debt. If it means seeking the help of other close relatives or friends, do so at the earliest.

Take legal action: If you have granted the bank a hold over some of your tangible assets when you were guaranteeing someone else’s loan, the bank will auction the same to recover the outstanding. However, if these assets are in the real estate space and are either under mortgage or under construction property, you can fight your case saying that they have not been fully paid for.

Since the bank tags the guarantor as a “wilful defaulter” when the borrower does not pay up, you could also approach the judiciary saying that at the time that you stepped in as a guarantor, there were no signs of the borrower defaulting. Just because the borrower has turned truant, does not mean that you are too.

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