- This topic has 5 replies, 3 voices, and was last updated 1 year, 4 months ago by
.
-
Posts
-
-
UHi all.
So my friend (primary guarantor) approached me in Nov 2022 to become a secondary guarantor for a secured business loan of 1.6 Cr (8 years tenure) for his father (borrower). Having worked with their business in 2019, I obliged to help since their business was working okayish and they were expanding. They also bought new machineries. Although that big amount scared me but my friend assured me that there is “no need to worry” and this is “just for formality”. And they have a good relationship with their bank (co-operative bank) since many years. So I signed all the relevant documents in good faith and “to help”. Yes, looking back, I was naive.
And then I go about living my life and forget about it. They did not tell me whether the loan started and even I didn’t inquire. They didn’t give me any sanction letter as well. Note: I didn’t have much salary in 2022 and 0 credit history (genuine question, why and how does a bank even approve such cases where guarantor is “poor”, have no assets or personal wealth which can reimburse such a huge amount)
Unaware, loan commences from Jan 2023. My friend and I don’t talk since May 2023 due to some other personal issue. However there is no problem with his father.
Everything is good until Jan 2024, I apply for a home loan and my bank tells me that I can’t get a loan since I’m a guarantor in a business loan and it has irregular payments and a SUB (substandard) state.
I call them and ask for a reason for the irregular payments. His father tells me the business is not working well and he is in talks with other nationalised banks for takeover (transfer loan to other bank) and for CC limit with current bank. I call his father back after a month. He says to call back in March since he is still in talks. I am furious at this point and since I don’t have any control and feel that since he’s been a businessman for soooo long and his relationship with bank is good, he will figure something out. I decide to wait more and give him time. I call back in May. Same response. I call him back in July, same response. He asks me to call back in Sep, I wait and decide to call him in Nov instead. He asks me to call back in Dec end.
At this point, full year’s payments have been missed. I get a notice from bank in Dec beginning that loan has NPA’d in Aug 2024. I also get to know that there is another loan of 1.4 Cr signed by other guarantor. I also get a call from random bank asking me if I can contact my friend since he’s missed the EMIs for his car (~40 lakhs) although I am not a guarantor in that (I checked the CIBIL reports myself).
I decide to give his father a break and another benefit of doubt that he might be sorting this out. So I call him 2 months later, ie this month, Feb. He says he’s still working on the takeover to nationalised bank.
But my patience is over. They are “good” people (I have seen them invest in good machineries for which they look loans and are expanding the business), but it seems to me that they have taken advantage of me and other to get loan approval (since a secondary guarantor could have been his wife as well or some other family member). I know they are more in agony than me which is why I decided to be calm about this, but like I said my patience is over now. A random google search also told me my friend, this time, has borrowed 9L for his own company and her mother as a guarantor and even that has NPA’d in Nov 2024.
I know I am late but hopefully not too late asking for help. I know guarantor cannot be changed unless there is takeover. But I doubt nationalised bank is going to approve this because if it did, this would have been over already.
So what legal steps can I take to safeguard myself from bank screwing me over?
-
BYou’ll have to look into the agreement you signed. Are you a limited or an unlimited guarantor? Either way if their account is declared as an NPA the bank can and will proceed against you and your friend. Keep an ear out and see if they settle the dues or not. I’d say prepare yourself for the worst outcome. Since you’re a guarantor to a corporate debtor, they can very well move for insolvency if you don’t pay. If you have any assets, either sell them to pay off the debt if you’re so inclined or go the unethical route and transfer them to your wife/husband/parents/siblings so they don’t come after them. Either way you’re gonna be stuck paying the amounts since you signed as a guarantor. I’m not sure what a primary or a secondary guarantor is but it’ll probably be clearer in the agreement.
-
BAltogether it is a secured loan. Worst case scenario is if the collateral they’ve given doesn’t cover their loan and interests, that’s when they come after the guarantor for recovery.
-
BBeing a guarantor is never a formality. Get that through your head. Never ever sign a guarantee agreement unless you receive part of the profits for the risk you’re taking.
-
U> Thank you for your replies, I read the whole thread. I posted this on behalf of another friend.
> Unfortunately, he and his friend are not on good terms (I also posted Part 2/More Info about their conversation in comments). He asked them before for a sanction letter but they never gave it to him despite repeated reminders. He don’t have the agreement letter as well (if that is different than a sanction letter). He is going to approach a lawyer soon. (also if you know any Mumbai based lawyer who can help in this case, can you pleaser share his contact)
-
-
-
-
FYou are a guarantor on the loan so you are liable to pay it off. Even if the loan is secured, the security may not necessarily cover the entire loan amount. It is quite common in business loans/CC/ODs that the collateral covers only 60-70% of the sanctioned amount and the rest is unsecured. With interest, penalties and other charges you are looking at 50-60% of the outstanding loan being unsecured.
Long back just out of college my very close friend asked me to sign as a guarantor for his home loan. I refused. We never talked to each other for almost a decade (he cut off relations). But then eventually better we got back to talking. He never defaulted on his home loan EMIs but then you can’t predict the future. Better safe than sorry.
-
