When you are in the process of availing a loan to buy your dream home, banks usually insist on you getting a guarantor to sign the documents. But what if you do not have anyone as a guarantor? Do not worry, here is what you can do.
1. What does guarantor mean?
When a bank gives you a loan, it will want to make sure that if you default on the loan payment for any reason, there is someone who will repay your loan. This person, who will repay the loan if you default, is your guarantor. Thus, even if you are unable to pay your loan, the bank will get the remaining loan amount from your guarantor.
2. Who is eligible to be a guarantor?
A bank usually insists on one of the family members to act as a guarantor for home loan for security reasons. However, a bank may also consider your friend to be a guarantor for the loan. Normally, any individual can be considered as a guarantor by the bank so far s/he is willing to take the guarantee of the loan in case of any default by the borrower.
3. Documents for a guarantor
The bank requires your guarantor to present his income report to make sure that he has a steady flow of money which is enough to repay your loan, if required. Any income proof and asset proof is enough for a guarantor.
4. How to get home loan without a guarantor?
What if you don’t have anyone who is willing to take the risk? What if you don’t want anybody to take that risk?
You can still get the loan; all you need is Loan Insurance Policy. This policy works exactly like a guarantor. Once included in your home loan plan as a separate insurance policy, it repays your home loan if you default on it. The premium depends on the time period of your home loan.
5. Other benefits
If some unfortunate event occurs, in your absence, your family will face the burden of the loan repayment. The bank can even sell your home if you fail to repay the loan as it is still mortgaged with them. However, the insurance will not burden your family. Also, if you prepay the loan, you will get your remaining premium.