One among the few things which hasn't changed thus far is the 'requirement of a Guarantor' under few conditions. Though earlier in 90-s a guarantor was almost a mandatory requirement by the lenders to grant a home loan, it is not so now. A guarantor is been asked for extreme conditions like high-value corporate funding or few low value funding where the comfort is not gained by the applicant's own financial strength. To add to the comfort, a guarantor is added and the loan is disbursed to the main borrower.
However, general knowledge about who, how and what about a guarantor is not generally understood before one obliges.
The most important notes about being a guarantor is listed here:
1. Financial or Non-financial guarantor:
There are both these types of guarantors that is demanded by a credit appraiser. If you are a non-financial guarantor for simple purposes like contacting the primary borrower, then need not worry. But if your financial documents have been considered to do loan for the primary borrower, then it's a serious call you need to take before you agree to be one.
2. Obligations accepted as a guarantor:
As a financial guarantor, you are obligated to pay up the loan outstanding and/or any other dues created by the primary borrower on the mortgage, in case of a default. A recent circular dated 1-July 2014 clarifies the stance that will be taken by the court in case of a 'willful defaulter' and their guarantors.
3. How does your own loan eligibility get affected:
Being a guarantor is as good as being a borrower. The only difference would be that the guarantor will not have to pay the regular payments of interest and principal to the lender, which the regular borrower would. However, the liability of the borrower and the guarantor are considered at the same tune. In an instance where the main borrower has taken a loan of 1 crore, the eligibility of the guarantor also is reduced by the exact amount when he wants to borrow fresh loan for himself. A record of the lending, repayment and any default will be maintained with the credit scoring companies and the score of the guarantor will be affected by the repayment pattern lead by the primary borrower.
4. Duration of the loan term of the primary borrower:
The loan term play a pivotal role for the guarantor too, as he/she is obligated till that tenure is completed. If it's a short term loan then the relief is of course early. If the loan is foreclosed prior to the end of the term, then the release of the guarantor-ship should also be notified by the lender to the credit scoring authorities which will enable the guarantor to obtain higher amount of credit for his own needs. A guarantor should monitor whether such has been correctly reported on time and should also seek an NOC from the lender after such closure of the loan.
5. Repercussions in the event of default by the main borrower:
It is not only limited to the payment of the principal outstanding, but if the guarantor is unable to do so, then his own assets can also be attached by the court to realise funds to nullify the losses incurred by the lender. In case of untimely demise of the borrower, when the loan was not covered by any insurance, the guarantor will have to come forth to make the payment to foreclose such loan.

Hence, be an informed person before you 'guarantee' someone else's repayment as sometimes due to family relations or friendship, one might tend to agree and regret later