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how to remove my name as a loan guarantor
26-Aug-2023 (In Civil Law)
Hi, 3 years back and when i recently got job, i signed as loan guarantor for my friend's home loan Rs.1500000. Now he is not in a situation to pay. And i am unemployed, moved out of india. I dont want to deal with it anymore i also have a case filed on him for owing me money. I want to get my name out as Loan guarantor. Please help/advise the best way to handle it legally.
1. An additional loan is granted without your consent
If you find that the borrower has taken an additional loan over the original amount that has been sanctioned without your consent, you may ask the bank to relieve you. However, you will still be liable to repay the outstanding on the original amount sanctioned.
2. A substitute guarantor for the loan
You may also approach the bank with an application for a release if there is a substitute guarantor for the loan. If the bank is really convinced why you are opting out and is convinced about the credentials of the substitute borrower, it may set you free. In such a case, your CIBIL score remains intact as the loan is closed as far as you are concerned.
3. Get the borrower to pay back
This seems a little far fetched, as you would not have to bother about opting out if the borrower was making timely repayments and had intentions of paying up her/his entire debt within the stipulated time frame. However, you can indeed give this a shot. If you have been a guarantor for someone's loan, it's obvious that you know her/him very well. Try to make her/him see reason and help her/him out as much as you can to repay your debt. If it means seeking the help of other close relatives or friends, do so at the earliest.
4. Take legal action
If you have granted the bank a hold over some of your tangible assets when you were guaranteeing someone else's loan, the bank will auction the same to recover the outstanding. However if these assets are in the real estate space and are either under mortgage or is an under construction property, you can fight your case saying that it has not been fully paid for.
Since the bank tags the guarantor as a "willful defaulter" when the borrower does not pay up, you could also approach the judiciary saying that at the time that you had stepped in as a guarantor, there were no signs of the borrower defaulting. Just because the borrower has turned truant, does not mean that you are too.
If you manage to come out of the situation you must have a discharge letter from the bank stating that you are no longer liable for the outstanding amount as on the date when your guarantee has been revoked. In such cases you may actually get away with a unscathed CIBIL score.
However, it may serve you well to know that in each of the circumstances mentioned above, the scales tip heavily towards the bank. When you sign up as a guarantor, you are giving the bank to invoke this guarantee at any point of time. As a result, the lender can sue you anytime.
There have been many cases when guarantors were put in a tough spot and had to pay up substantial chunks of money to avoid facing legal action. Being a guarantor is as good as availing of the credit facility yourself so think about it carefully before you make any decisions. It's tough to say no to people who may matter to you, but you cannot possibly put your financial future in jeopardy.
If you find that the borrower has taken an additional loan over the original amount that has been sanctioned without your consent, you may ask the bank to relieve you. However, you will still be liable to repay the outstanding on the original amount sanctioned.
2. A substitute guarantor for the loan
You may also approach the bank with an application for a release if there is a substitute guarantor for the loan. If the bank is really convinced why you are opting out and is convinced about the credentials of the substitute borrower, it may set you free. In such a case, your CIBIL score remains intact as the loan is closed as far as you are concerned.
3. Get the borrower to pay back
This seems a little far fetched, as you would not have to bother about opting out if the borrower was making timely repayments and had intentions of paying up her/his entire debt within the stipulated time frame. However, you can indeed give this a shot. If you have been a guarantor for someone's loan, it's obvious that you know her/him very well. Try to make her/him see reason and help her/him out as much as you can to repay your debt. If it means seeking the help of other close relatives or friends, do so at the earliest.
4. Take legal action
If you have granted the bank a hold over some of your tangible assets when you were guaranteeing someone else's loan, the bank will auction the same to recover the outstanding. However if these assets are in the real estate space and are either under mortgage or is an under construction property, you can fight your case saying that it has not been fully paid for.
Since the bank tags the guarantor as a "willful defaulter" when the borrower does not pay up, you could also approach the judiciary saying that at the time that you had stepped in as a guarantor, there were no signs of the borrower defaulting. Just because the borrower has turned truant, does not mean that you are too.
If you manage to come out of the situation you must have a discharge letter from the bank stating that you are no longer liable for the outstanding amount as on the date when your guarantee has been revoked. In such cases you may actually get away with a unscathed CIBIL score.
However, it may serve you well to know that in each of the circumstances mentioned above, the scales tip heavily towards the bank. When you sign up as a guarantor, you are giving the bank to invoke this guarantee at any point of time. As a result, the lender can sue you anytime.
There have been many cases when guarantors were put in a tough spot and had to pay up substantial chunks of money to avoid facing legal action. Being a guarantor is as good as availing of the credit facility yourself so think about it carefully before you make any decisions. It's tough to say no to people who may matter to you, but you cannot possibly put your financial future in jeopardy.
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Adv. Ishan Rohan
Ranchi | 200+ Answers
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How can I remove myself as a guarantor?
The borrower will typically submit a request for you to be removed as a guarantor to the lender and demonstrate their ability to make payments on the loan even without your guarantee. The loan will disappear once you pay it off. You can ask the person who lent you money to refinance it.
How do I revoke a guarantor?
Get a new appraisal of the property. ...
Pay off the loan amount guaranteed. ...
Refinance. ...
Sell. ...
Repay the entire loan.
Can you back out of being a guarantor?
You cant stop being a guarantee once you have signed the loan agreement. You wont be removed from the contract because your credit rating, employment status, and other factors all played a role in the approval of the loan.
How do I withdraw my loan guarantee?
It is almost impossible to remove your name from the list of guarantors unless the borrower provides collateral or finds a replacement guarantor. You will also have to go through several approvals from the lender before you can be released from the contract.
Disclaimer: The above query and its response is NOT a legal opinion in any way whatsoever as this is based on the information shared by the person posting the query at lawrato.com and has been responded by one of the Divorce Lawyers at lawrato.com to address the specific facts and details.
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