The best loans in Singapore are fast approval loans, which are easily available within an hour. Due to their popularity, these loans are in high demand. As such, lenders have a right to protect themselves with the increased demand. Popular legal loans that need a guarantor are business loans, home loans, study loans, and car loans. A loan guarantor has to shoulder many responsibilities since things can go south anytime, once the borrower defaults payment.
It’s in your best interest to understand the loan guarantor requirements in Singapore before becoming one! You can find out here if a 1 hour loan service really does exist.
What does a loan guarantor mean?
A loan guarantor is someone who bears the loan repayment responsibility on behalf of the borrower, in the case of default payments. For example, you become the guarantor for your brother’s car loan. Suddenly, he’s retrenched and unable to service the loan payments. This is where your role as a guarantor kicks in. You would have to continue paying his instalments either till the end of the loan tenure or such time that he is able to afford the payments again.
Responsibilities of a loan guarantor
Apart from settling all outstanding legal loans, the loan guarantor is also liable for all legal fees, costs, and accumulated interest incurred over the entire default payment period. Once the borrower misses a payment, the loan guarantor will be mobilised. Hence, it is crucial to understand the details of the loan guarantor requirements in Singapore. Read more about the loan guarantor’s (surety) responsibility under the Ministry of Law here.
Pointers to note before becoming a guarantor:
Understand your obligations
Take note that you have to be very clear about your legal and financial obligations prior to becoming a guarantor. Read carefully the fine prints of the loan documents including all jargon, clauses, terms, and conditions stated within. Be thorough and analyse the full contents of the loan contract with the lender.
Clarify all doubts
You need to discuss openly with the borrower regarding your role as a loan guarantor. Here are some questions to consider:
a) Can you really afford to pay off someone’s debt?
b) Does the borrower have a good credit score?
c) Does the borrower have the capability to repay you back?
d) What is the purpose of such fast approval loans?
Implications as a guarantor
A number of repercussions will take place if the guarantor fails to settle the borrower’s debt. So are you prepared for it?
Seizure of assets
Make sure that you have enough assets to cover the legal loans in the event of default payments by the borrower. Are your assets easily convertible to cash in case of an emergency? Keep track of your current and fixed assets so that you can liquidate them at any point in time.
The guarantor can also face bankruptcy and has to deal with the consequences that follow. He might not be able to travel freely across borders or purchase high-value items without the consent of the Official Assignee.
Impairment of future loans
If the guarantor is unable to service the loan, it will impact his credit score ratings. This will affect all future fast loan approval applications as well and the inability to get one. Be prepared if this happens!
Future opportunities comprised
The guarantor’s future career opportunities could be compromised as well. Potential employers require a declaration of any outstanding legal loans on hand. Hence, your chances of securing a job would be slim.
Upon becoming a guarantor, you should retain a copy of the endorsed loan contract, to keep track of the timely repayments due by the borrower. It would be advisable to check in with the borrower once in a while.
Do you have the financial means to service the outstanding payments? Safeguard yourself before becoming a guarantor by assessing the borrower’s repayment capability beforehand. It’s better to be safe than sorry!
Consult a lawyer
It is vital for the guarantor to understand the fine print and jargon used in the loan contract since he is responsible for the total outstanding loan in the event of default payments. It is advisable to seek a lawyer’s professional help as they are well versed with contractual obligations. They are also in a better position to explain all the legal and financial obligations of a guarantor.