Education today in India has become more expensive, especially for those who enrol in prestigious universities or take higher education abroad. Education loans sometimes act as a financial lifeline for students pursuing academic dreams. But what happens when, in the case of education loans, the bank wants additional assurance. A lesser-known, but crucial, stakeholder in the borrowing process, is the education loan guarantor.
An education loan guarantor is absolved by agreeing to be responsible for repayment of the loan if the borrower does not pay. You could think of them as the lender's financial safeguard. Most education loans in India, have long terms of years, typically require a guarantor.
Guarantors and co-applicants can often get confused. A guarantor is only responsible in the instance when the principal borrower defaults, whereas a co-applicant is responsible for paying back the loan from the onset. However, the guarantor may suffer a considerable amount of financial and legal disparity.
Banks seek out guarantors in order to minimise their loan risk. A guarantor with a stable income and a solid credit history gives students within collateral or a stable income the assurance that the loan will be repaid, either by the borrower or the guarantor.
Withdrawing as a guarantor is a reasonable financial decision if:
In conclusion, while being a guarantor for an education loan is a little considerate act, it also has issues attached to it. Such a role requires the same care as the concern in the Indian financial system where familial ties often intermingle with financial issues. Understand the commitment, think of the risks, and act prudently.
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