Home-Loan Insurance as Loan Guarantor in India

Get home loan without guarantor by using Home Loan insurance. Bank needs a loan guarantor for approving home loan in India. Home-loan insurance can be a collateral security if relatives can't help. Premium is high. Insurance is only for loan and Home property insurance is separate. Premium can be paid monthly with EMI.

Written by Anil Gupta
  Anil Gupta    Updated 3 Mar, 20

What is Home loan GUARANTOR?

A Guarantor is a person who can guarantee the re-payment of loan amount in case something happens to you i.e. death or any other disability.

This means that if you default in paying back the loan due to any reason whatsoever, the bank will pass on the liability to the guarantor. Guarantor is liable to pay back the remaining amount of loan.

An interesting point to note here is that almost all public sector banks like SBI, PNB etc. have this as a mandatory requirement to give you home loan. Whereas private banks do NOT even ask for it. They are okay with your salary slips and other income proofs.

Who can be a Home Loan GUARANTOR?

Anybody who can vouch for you can be guarantor. Normally they ask for a person from your family, but your friend can also be your guarantor.

What documents are required from a GUARANTOR?

A guarantor needs to submit his income statements to prove that he/she is capable of paying back the loan amount in case the person in question defaults. Normally, the salary slips and other income proofs like PF, any existing property proofs (photocopies) are acceptable.

Get a home loan without Gurantor

In today’s world, it is really difficult to find a person who would like to be your guarantor.
Nobody wants to inject an unnecessary tension in his/her mind by signing legal papers for you.

Who knows, you may default tomorrow and why should anybody pay in case you default?

Ask yourself, would you sign a guarantee for anybody? Even parents ask their children to do it on their own as they also do not want to carry their child’s loan burden.

Well, I was the one who did not had ANY guarantor whatsoever.

This meant that even though I had all the papers in place and was eligible for loan, i could not get it just because I did not had a GUARANTOR!!
I had lost all the hopes until i got to know of an insurance policy which could act like a GUARANTOR for me! This policy is called Loan insurance policy and is offered by almost all banks/insurance companies these days.

What is Home Loan Insurance Policy?

An insurance tied to your home loan EMI payments meant to safeguard bank’s investment in giving you home loan.

The insurance company takes on the burden of re-paying the loan to bank in case something happens to you.
The amount of premium is calculated based on the tenure (total months) of your loan and the amount that is insured reduces with each EMI payment made by you.

The policy acts as a guarantor for you in case you don’t have any. I preferred buying this policy instead of requesting people to vouch for me. I feel that it is much better to depend on yourself than somebody else!!

Benefits of Home Loan Insurance Policy?

The biggest crisis and pain that your family faces in case something happens to you is the loss of a beloved one. This pain is increased if the bank comes to your doorstep to ask for EMI’s and the pain is even more when you get to know that the home which you bought is actually mortgaged with bank and hence can be sold by bank to recover the outstanding loan.

The home loan insurance provides a big relief in this situation. The insurance company will pay back the outstanding loan to bank, bank will release the mortgage and will transfer the property on your family’s name.

Also, the premium amount that you pay is for the full tenure. In case you prepay the loan and close it before your actual tenure, home loan insurance company returns the unused premium back to you. But this is generally a small amount as per the terms and conditions of the policy.

So, apart from being a guarantor, it helps you LIVE and reach heaven tension free.


Written by Anil Gupta
  Anil Gupta  
Mentor | Immigration and Finance Journalism | Humor | Opinions are my own