• Home Loan Guarantor in Malaysia

    In Malaysia, we generally need a guarantee when we are taking a home loan as an alternative to loan security. This is generally provide by a person bound by a legal contract who would have to pay your home loan debt in case you are unable to do so. Hence, this person also known as the guarantor is also liable to pay the debt if the borrower is unable to do so. But the real questions that need answering are as below, to help you understand more about the Guarantor and further relevant details of this individual - including their rights and roles.

    General Eligibility Criteria of a Home Loan Guarantor

    The most crucial requirements of a home loan guarantor include the following:

    1. He or she must be at least 18 years old or above

    2. He or she should not be bankrupt, obviously.

    3. He or she should be of sound mind and have the cognitive capacity enough to understand the role and responsibilities as guarantor and carry them out accordingly.

    4. He or should have not been forced but freely consented carry out the role of a guarantor.

    However when it comes to the final decision acceptance as a guarantor, the financial institution can take the call.

    Role of a Home Loan Guarantor

    Before signing as a guarantor, you should always understand your liabilities in the role, since later you might find it too overwhelming. Here are some of the things that a guarantor must ensure he or she does before getting into this role :

    1. It is essential to check your extent of liability which is specified detail in the guarantee document. As a guarantor, you may also be held responsible for the liabilities of the borrower in based on the terms conditions of the guarantee document.

    2. You may be also rendered liable for the borrowers defaults any payment to the financial institution and the company in return makes a demand on the guarantor.

    3. Note, that your credit score is also affected by the repercussions of the home loan payment.

    Rights The Guarantor is Eligible For

    There are certain legal rights that a guarantor is eligible for once they are accepted by the financial institution providing the home loan. Here are the most important rights that you will possess once a guarantor:

    1. You can get a copy of the letter of guarantee or of the contract of guarantee along with other documents pertaining to the loan transaction

    2. You can seek legal advice from your lawyer prior signing the contract of guarantee although the legal fees must be paid by you.

    3. You also have access to all the information on the outstanding balance of the home loan amount from the financial institution with the borrower’s consent

    4. You also have the right to ask the borrower to pay off the loan to free you from all your liabilities as a guarantor even prior to the lending company’s approaching the borrower to pay the remaining home loan amount. This is however based on the terms and conditions of the loan, which may vary from customer to customer.

    Note that the above right may be indemnified away by the borrower for any payment made to the financial institution. Hence the borrower can be sued for the amount paid by the guarantor to the lending company.

    Limitations of the Company To Take Action Against The Guarantor

    This is really important to know since, this where you legal rights as guarantor come into action when you are held liable unfairly by the lending company:

    • A lending company cannot bring an action against the guarantor in the case where a guarantee is made payable on demand, unless a demand has in fact been made under the guarantee against the guarantor

    • Based on the provisions of the contract of guarantee, a demand can be served in person or by ordinary post or even by registered mail

    • The lending company has six years from the date of the first demand to bring legal action against the guarantor.

    Circumstances Under Which A Guarantor May Be Discharged

    The following are the main situations under which guarantor may be discharge:

    • You are released from your obligations under a guarantee when the full payment of the debt owing to the financial institution is completed

    • In the case a guarantee is to be enforceable against the guarantor, the terms of a guarantee must be adhered to by the lending company.

    • Again make sure, you are aware of your liabilities in the event that variations are made to the terms and conditions of the loan.

    Tips To Handle Your Role As A Guarantor with Ease

    Even if they are tips, they still need to be kept in mind when serving the role of a guarantor for a home loan in Malaysia:

    • You must read and understand the nature of the guarantee.

    • Never sign a partially completed or blank form when signing in.

    • It is advisable to seek professional/legal advice on the legal implications of the guarantee before signing the form or document.

    • Do not forget to check and make sure that the guarantee is subject to the laws of Malaysia

    • Be cautious of providing a photocopy of your identity card or passport to anyone other than the lending company or the lawyers acting on your behalf

    • Under the following situations DO NOT sign any guarantee:

      • You do not have a financial, business or moral interest in the transaction and are uncertain as to the nature of the transaction

      • You are doubtful about the ability or integrity of the borrower.

      • You are not mentally comfortable to take up the role.

      • Are not clear, about the terms of the guarantee and do not have an independent party explaining it to you

      • You don’t consider yourself in the capacity to settle the debts of the borrower defaults on his or her payments.

    • Ensure that the maximum amount to be guaranteed has been clearly stipulated and note whether it is inclusive of all the accrued interest.

    • Note that In a joint or joint and several guarantee:

      • All the guarantors sign the guarantee

      • Borrower’s name is clearly stated on the guarantee document

    • You must seek clarification or explanation on any of the terms of the guarantee, if in doubt.

    How To Withdraw A Guarantee?

    If you find it overwhelming, to be a guarantor, here is what you have to do:

    Make a request to be released from the guarantee. Note that the decision is up to the lending company. Here are what may follow:

    • The company may agree without conditions

    • The company may agree subject to an equivalent replacement guarantor. However, this is subject to the new guarantor agreeing to assume the present, past and future liabilities of the existing guarantor

    • The company may agree subject to part of the debt being repaid

    • The company may disagree completely unless the principal debt is fully repaid

    • you may be even demanded to fully repay the entire remaining debt.

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