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Who is an Education Loan Guarantor and What is Their Role?
Abroad Education Loan | Updated

Students, are you someone who is planning to study abroad? Then you might have come across the term “Loan Guarantor” while researching an Education Loan. You might be wondering who this person is and what they have to do with Education Loans. Worry not. You are not alone.
In this blog, we will break down what an Education Loan Guarantor is, their involvement in the Education Loan process, roles and responsibilities, etc.
Who is Called an Education Loan Guarantor?
An Education Loan Guarantor is someone who takes the responsibility of repaying the Loan if the student fails to do so. Usually, lenders ask for a Guarantor if the student would not meet the eligibility criteria, or if the student could not demonstrate financial capacity to repay the Loan.
If a third-party collateral is involved in the secured loans other than the co-applicants', then the owner of the collateral (third-party) is said to be an Education Loan Guarantor.
Why do Lenders ask for a Guarantor?
- The guarantor is someone who guarantees the repayment of the Loan.
- Lenders ask for a Guarantor if the applicant and co-applicant do not meet the repayment requirements of the lender.
- Though the applicant and co-applicant are responsible for the repayment, the Guarantor also takes equal responsibility and can lose the pledged collateral if the applicant defaults.
This reduces the risk to the lender, strengthens the student's profile, and can enhance the chance of loan approval. Hence, Lenders ask for a guarantor to mitigate risk factors and increase the likelihood of loan approval.
Difference between a Financial Co-Applicant and a Guarantor
Many often get confused between a financial co-applicant and a Guarantor. Let's break down the difference between the two.
Category |
Financial Co-Applicant |
Loan Guarantor |
Definition |
If the Primary co-applicant has no income, lenders usually ask for someone else with a stable income to step in and share the responsibility of repaying the loan. This person is called a financial co-applicant. |
A guarantor is someone who offers their collateral to help the applicant and co-applicant get a loan when they don’t have any. They step in after the co-applicant to guarantee the loan. |
Involvement |
Involves both Secured and unsecured loans |
Mostly involved in Secured Loans |
Who is Eligible |
-Parents, spouse, parents-in-law, including first cousins. -Anybody with whom the relationship can be proven. |
-Lenders don’t require proof of relationship for a guarantor. Anyone, family or not, can be a guarantor, as long as they're willing to pledge collateral. -Since the loan is backed by security, the relationship doesn’t matter. |
CIBIL impact |
A good CIBIL score is mandatory to be a financial co-applicant. |
An average CIBIL score is enough to be eligible. |
Documents Required |
Documents that prove the financial stability of the co-applicant, along with the KYC. |
Along with KYC, collateral documents are also required. |
Reach out to us to check your Co-applicants' eligibility status.
Who can be a Loan Guarantor?
Unlike a Co-applicant and a Financial Co-applicant, a Guarantor does not have to prove a relationship status with the borrower. Any individual who can pledge collateral as security against the loan amount can be a Guarantor.
Ideally, a Guarantor could be a family member or even a friend.
Benefits of Having an Education Loan Guarantor
Below are the benefits of having an Education Loan Guarantor...
Higher Chances of Education Loan Approval
Having a Loan Guarantor would enhance your chances of getting an Education Loan. Lenders are most likely to approve loans if a security is provided against the loan amount, especially if the applicant and co-applicant have fewer income sources and a poor CIBIL score.
Faster Loan Approval
Education Loans with a Guarantor are processed faster. Lenders would feel more secure with the collateral involved, and the risk associated with defaults is reduced. This makes the lender process the Loan application file faster.
High Loan Amounts
Students can get higher amounts comparatively, with a Guarantor's involvement. Students can get access to better Loan terms, including interest rates, repayment options, etc.
Risks associated with being a Loan Guarantor
Below are the given risks associated with being a Loan Guarantor
Legal Liabilities
Lenders hold complete authority over the collateral pledged by the Guarantor if the borrower defaults. The Lender may step in and deserves to take the necessary action that is already mentioned in the terms of the loan agreement. The guarantor may even lose the collateral that is pledged if the borrower is irresponsible.
Financial Burden
Being a Guarantor can add a significant burden if the borrower is facing issues with the monthly EMIs. The Guarantors may even have to intervene and cover the loan EMIs, which makes it difficult for them to meet their financial obligations.
Impact on CREDIT Score
Being a Guarantor can significantly impact the CREDIT score of an individual, even if the borrower does not pay EMIs on time. Borrowers' delayed payments, write-offs, and settlements also impact the Guarantor's CIBIL score, along with the applicants.
Important Things to Know Before Becoming a Loan Guarantor
Before you decide to be a guarantor for anyone, consider the following points...
Look at the Applicant’s Financial Condition
One must keenly check into the financial history and condition of the borrower to check the repayment capacity before agreeing to be their Guarantor.
Read the Agreement Thoroughly
It is advised for individuals to read the terms and conditions of the loan agreement thoroughly before signing. This is done to be aware of the consequences to be faced if the borrower fails to repay the loan.
Keep a watch on Borrowers' Repayments
Ask the borrower to keep you informed each time they pay their EMIs, and actively keep yourself updated with the payment history. This is done to ensure that timely payments are made by the borrower.
However, the terms and conditions of the guarantor differ from case to case and lender to lender.
Conclusion
A Guarantor plays an important role in getting an Education Loan. In this blog, we have covered everything about a guarantor, such as who can be an Education Loan Guarantor, and what the benefits and risks associated.
Reach out to us to make informed choices about your Education Loans and enhance the chances of getting the same. We at WeMakeScholars have an experienced and dedicated financial officer who can suggest the right Education loan and lend you support throughout the application process, making it stress-free.
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