SynopsisIf you are a financial guarantor, you will be responsible for repaying the entire loan in case your sibling is unable to do so. The bank also has the right to seize your property or assets, if required.
If your sibling asks you to be a guarantor, know that you will have to repay the entire loan in case of a conflict. To be on the safe side, take a written undertaking from your sibling that he will repay the loan and you will step in only in case of financial distress. He could take you for granted and stop paying even though he is earning. Find out your responsibilities if you help your sibling take a loan or guarantee it.
If sibling is a loan guarantor
Your liability will depend on the type of guarantor you are: financial or non-financial. In case of the latter, you only act as bank’s source of contact for your sibling, who is a borrower. If your sibling defaults on EMIs and can’t be reached, the bank will contact you to reach him. If you are a financial guarantor, you will be responsible for repaying the entire loan in case your sibling is unable to do so. The bank also has the right to seize your property or assets, if required.
If guarantor dies with heirs
If you were acting as a financial guarantor for your brother’s loan and you pass away, your children or legal heirs, will inherit this liability and will have to repay the debt if the sibling does not do so.
If a sibling takes a joint home loan
If you are a co-applicant or a co-borrower for a home loan with your sibling, you will enjoy tax benefits, but will also share the same responsibilities as the primary borrower (sibling) and will have to repay the entire loan if your brother fails to do so. The bank can also take possession of your property and assets to repay the loan.
If a sibling dies with debt
If your sibling has various debts and passes away, you as a sibling will have no responsibility to repay them. The liability will fall only on your sibling’s legal heirs, which may include his spouse and children.
If you are a co-applicant for sibling’s education loan.
As in case of other loans, if you are a co-applicant for your sibling’s education loan, you will be required to repay the loan in case your sibling is unable to or refuses to do so.
Also read: How children can fix money problems
Also read: Children’s inheritance rights over parent’s property
Also read: Communicating can defuse potential financial conflicts with your brother or sister
(Originally published on Jan 24, 2022, 06:30 AM IST)
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