Is a Guarantor Required While Taking an Education Loan?


  • Why is a guarantor needed for an education loan?
  • Read the post and know about the same in detail.

Yes, you might need a guarantor for an education loan. If your loan amount exceeds the INR 4 lakh limit, you may be asked to provide a security to the borrowed loan amount by adding a guarantor to it. The guarantor will help you borrow a high loan amount, and his credit history or income will get you an attractive rate of interest. The loan aims to provide financial stability to the student so they can pursue their higher studies without any hassle. The requirement of guarantor may vary based on your lender as well. Read the post and know the importance of a guarantor for an education loan.

Prevents Education Loan from Becoming an NPA When the Student Defaults

The guarantor for an education loan is not only a witness who attests the authenticity but they also guarantee that students will pay the loan. A guarantor in effect also backs the borrower financially and guarantees that the loan will be paid back in case you default on payment. Banks wait for a few months before issuing a notice to the guarantor about the default payment. From the bank’s perspective, the guarantor for an education loan is treated the same as the primary borrower. Hence, it is the responsibility of the guarantor to pay the loan in full. In case the guarantor doesn’t pay the loan, the bank treats it as wilful defaulter as the student.

Impact on the CIBIL Score

Banks don’t discriminate between the guarantor and borrower in case the default happens on the payment of the education loan. This impacts both the guarantor’s and student’s CIBIL score. If you become a loan guarantor, you should know its effect on your credit score. You can be a guarantor in an education loan to help your friend or family to meet the loan eligibility. This means the non-payment of the student loan can lower your CIBIL score whether you are the original borrower or not. Most guarantors do not realise this when they appear as a guarantor for an education loan.

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What to Know Before You Become a Guarantor?

No credit information is hidden from banks as they can access your credit report from CIBIL. With such increased transparency of your credit information, it is advised not to become a guarantor unless you know the person well enough and whether the borrower is capable of paying the loan or not. If you are ready to become a guarantor for an education loan, check which college the student has been selected for admission. Because it is easier for an IIM, IIT, B.Ed graduate to pay up the loan as there are more job prospects in future after the course completion compared to someone who secured admission to a low ranked institute. Becoming a guarantor for an education loan may impact your capability to borrow a loan. For example, if you have a loan of INR 30 lakh for yourself and become guarantor for another INR 20 lakh, this may have bearing on the amount you borrow in future.

Documents for the Guarantor

To be a guarantor for an education loan, you need to provide a few documents that verify your identity and income details. Have a look at the documents you’ll need when you apply as a guarantor for an education loan.

ID Proof:

  • Aadhaar Card
  • PAN Card
  • Voter ID Card
  • Passport
  • Driving Licence

Income Proof:

  • Salary Slip/Certificate
  • ITR Report
  • TDS Certificate
  • Bank statement
  • Form 16

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