Getting loans in order to purchase something or any other purpose that requires a heavy amount of cash, from banks or any other private organization is a common deal these days. The loan taken may be an education loan, loan for purchasing a new house, car loans etc. But these loans are not provided just like that to any customer. There are many rules and regulations, and pre-requisite claws for it. A loan is provided depending on the credit history of the borrower. The lender needs to first make it sure if the borrower is in the financial condition to repay the entire amount or not because the borrower is not only to repay the principal amount he borrowed but also the interest amount added to it.
For that the lender, whoever it is (bank or any private organization), will get the credit history of the borrower and if they see that the borrower has a low credit then they will not lend the loan as they would feel that it is unsafe to lend them the loan because they may not be able to repay it. In such cases if the borrower still needs the loan, the bank asks for a guarantee. Guarantee to the term that in the given period of time the borrower will repay his loan with interest. If someone, a family or friend, signs as the guarantee for the person taking the loan then that person will be known as a guarantor.
In other words, a guarantor is that person who is held responsible for someone else’s debt or any performance under any contract (legal or social). This person acts as a co-signor to the contract and if by chance the borrower fails to repay the entire sum of finance taken as loan (Principal amount + interest) within the given period of time then this person who has signed as guarantor is to repay the loan instead. However, there are certain rules attached to the guarantor as well. The borrower cannot just bring any person and make sign for the sake of guarantee. It is required that the person the borrower brought as guarantor must have a good credit, or perhaps higher than the borrower. Only then the lender will take him for guarantee of the loan and provide the same.
While taking a loan, the borrower must make it sure beforehand if he or she can repay the amount or not. They need to keep it in mind that they are not only to repay the principal amount they took but also the interest added to it. It highly essential to do so because if they fail to repay it the bank will catch hold on the guarantor they provided and they will have to repay the entire sum, because they as per the contract, they are the co-signor of the deal you made under which they guaranteed their own assets pr services. Therefore in your absence or failure, it becomes their duty to repay the loan which you took for yourself.
However, the guarantor must also be cautious on their part. Before signing the contract, or before becoming the guarantee of the contract, they must on their personal note also make it sure if their friend or family, who is the borrower, can actually repay the debt or not. They must keep it in mind that if by chance the borrower fails to repay the loan in time then they will have to pay the entire amount on their behalf. Therefore, for their own financial security, the guarantor must check on the financial condition of the borrower.