To qualify for home loans, applicants usually have to meet a list of criteria set by the lender. These are strictly enforced and any mismatches can result in rejections. Naturally, while some may be eligible for a loan, others may not but there are ways to improve eligibility. One way to do so is to apply for the loan with a guarantor.
A home loan guarantor is an individual that accepts financial responsibility for the loan in question. These individuals are required to have a strong financial and credit profile, to assure lenders that they are capable of fulfilling the home loan EMI payments in case the applicant defaults. All consequences of default by the primary borrower also apply to the guarantor.
However, enlisting a guarantor isn’t as common. Some instances where the primary applicant may need a guarantor to step look like these:
- The amount they wish to borrow is beyond the limit of the lender’s policies
- The applicant has a relatively weak financial standing, such as a low credit score
- The applicant’s credit history reflects problems such as previous credit card/ loan debt settlement issues
- The applicant has a high-risk job or is at an advanced age
- The applicant is self-employed or earns less than the predetermined minimum income level