One of my friend took overdraft loan of INR 3.5 Lacs for business purpose for which I stood as a guarantor. Due to market circumstances his business couldn't run and he has closed the business already and not much amount was received to him. he has joined a job, but due to bad CIBIL score and low tenure of work, can't get a personal loan to settle the loan. Now as bank has realized that my friend can't pay back the loan, bank is asking me to repay that loan as I stood guarantee for the same. When I asked to settle it against the collateral during loan approval, bank stated that there is no collateral taken for this type of loan. My friend is not reverting to me as he is not in financial condition to pay any and saying that he may commit suicide if bank forces him to pay. My questions: 1) What kind of legal actions bank can take against me? 2) Is there any legal way by which I can get out of direct responsibility of repaying the loan as bank ownself had not taken any collateral for same? 3) Can I ask my friend to hire a lawyer, to give notice to the bank, asking either restructure the loan or convert to term loan instead of following up with guarantor?
1) bank can sue you to recover loan amount with interest
2) you cannot be absolved of your liability to repay loan amount
3) bank is not going to act as per legal notice .
4) please note that liability of principal debtor is co extensive with hat of guarantor
1. if account goes NPA there is no colleteral bank can recover same from you.
2. See for that agreement of the loan and loan facility has to be seen, the banks claim doesnot fail and your responsibility is equal to borrower so it cannot be parted away just if there is no colleteral.
3. The friend can settle with the bank and can get it restructed but if he fails and has no property to be attached to pay the loan the responsibility shall come on you to pay same or your property can be attached vide a court order,
Guarantor is equally liable with borrower to pay the loan amount along with interest in case default in payment of loan.
A guarantor is having the same liability as the borrower. A guarantor and borrower are jointly and severally liable to repay the loan amount. Bank can initiate recovery proceedings against both or either of the borrower and guarantor. You as a guarantor has got a right of subrogation that is if you pay the amount due to the bank then you can initiate action to recover the same from your friend. Other than that you can not initiate action against the borrower for non payment of loan amount
Dear Client,
In case of laon default, bank can proceed even directly to gaurantor.Recovery suit as it may not be secured loan.
Now you have no option except to settle it.
Covnerting into term loan can be done by one time settlement process. And bnak cannot be forced for this but have to agree bank authoriteis for this.
1. If the bank is not able to recover the loan amount from the borrower, it will innitiate legal action to recover the amount from the guarantor.
2. Since you have stood as guarantor then you cannot escape the liability.
3. He can engage the services of a lawyer however the lawyer cannot travel beyond certain extent on this, since this borrowal is an admitted fact.
