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Old 15th September 2022, 15:55   #16
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Re: Purchaser did not repay car loan, guarantor commits suicide

Quote:
Originally Posted by RedTerrano View Post
At the police station, API Dyandev Nikam and Hawaldar Sachin Barkade demanded moolah to keep him from getting arrested.
I understand one becomes liable to make good the defaulted dues, but can one getting arrested for it ? Or was it the police trying to make a fast buck ?

In my first job, fresh out of college - knowing zilch about legal matters - I vaguely remember signing off on a a couple of my colleagues (now ex-colleague) loans (one a site loan the other was a vehicle loan). Thankfully the loan duration has elapsed and no one has come knocking. I assume that devil is now out of the way- touchwood.
I know, my ignorance does not absolve me of the responsibility.

This also drives home the point that basic financial education should be part of our schooling. Something on the lines of Arts&Craft/MoralScience, something that is taught but not counted for the final exams.

And RedTerrano - that bland news report has been made so relatable via your post.
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Old 15th September 2022, 15:57   #17
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Re: Purchaser did not repay car loan, guarantor commits suicide

Sad to see this. I had a couple of close experiences of this where I was not directly involved.
1. A neighbor- Lets call him Mr. A, wanted a personal loan from the bank. The bank asks for a guarantor. Mr. A asks friend Mr. B to stand guarantee with an assurance that he will pay the loan and he will not need to intervene. After paying a few EMIs, Mr. A stops paying the loan. The bank approaches Mr. B and asks him to pay up. Mr. B asks Mr. A to pay. Mr. A tells, I don’t have money, let the bank do whatever it wants. Mr. B out of fear of legal repercussions, pays on behalf of Mr. A.

2. A friend wanted to take a housing loan from Vijaya Bank about 15 years back. They wanted a guarantor. He asked me, I declined. He approached another friend, who stood guarantee. I informed this guarantor friend to make a parallel affidavit or agreement with the borrower friend that in the event of his default, the house will be transferred to the guarantor's name. Fortunately, the borrower was in a good job and had every intention of returning the loan and repaid it off in 3 years.

I have a very clear stand. Will never be a guarantor to anyone. Blood or not. If you don’t want my relation since I am not your guarantor, so be it. Wish you well. Its not worth getting into financial strain to protect some relationship which is based on such flimsy grounds in the first place.

I don't think established private banks ask for guarantor anymore. This is asked by smaller non established banks, since borrowers don't get a loan from established banks as they are not fully credit worthy.
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Old 15th September 2022, 21:08   #18
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Re: Purchaser did not repay car loan, guarantor commits suicide

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Originally Posted by hrman View Post
I don't think established private banks ask for guarantor anymore. This is asked by smaller non established banks, since borrowers don't get a loan from established banks as they are not fully credit worthy.
Not sure about private banks but Established Public banks like SBI do ask for Guranteer.

I personally know someone in my relationship who was guarantor for a SBI loan.

Personally I never lend big amount of money to anyone including my blood relatives. If some close friend or relatives ask for big amount I will pay lesser amount which i am ok to not get back.
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Old 16th September 2022, 09:45   #19
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Re: Purchaser did not repay car loan, guarantor commits suicide

Can someone who works in these banks which ask for guarantors help understand the need for this?

If its an unsecured loan (like personal loan), banks should approve them based on prior relationship, assets being managed for the client etc, and charge higher interest to cover the risks.

For secured loans, mortgage by definition is a guarantee. If the mortgage is a depreciating asset like a car, they can reduce the loan amount accordingly. They of course charge a higher interest anyway.

So, why involve a guarantor? Is it that safe banking practices are not followed under pressure to meet disbursal targets?

Or is it that this is how they've dealt with loans traditionally, and no-one wants to clean it up and annoy the sales guys.

It just seems wrong that a third party has to carry a long-term liability without any apparent benefit from the loan. Almost like collective punishment during British times.
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Old 16th September 2022, 10:05   #20
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Re: Purchaser did not repay car loan, guarantor commits suicide

My parents had to bear the consequences of trying to help out a good for nothing husband of a family friend a long time ago. His wife asked my mother to sign as guarantor for a good amount to help her send her husband to the gulf. Things didn't work out and he ended up a deadbeat. The bank manager forced the guy to pay up (he ended up getting a job back here, and could have, in theory paid up) - but he just said no - all our family savings went into that debt.

Suffice to say that I am not going to be a guarantor to anything unless i am willing to give that amount to my friend as a loan in the first place.

Last edited by greenhorn : 16th September 2022 at 10:35.
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Old 16th September 2022, 11:04   #21
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Re: Purchaser did not repay car loan, guarantor commits suicide

Neither a borrower, nor a lender be
For money looses both, itself and the friend!
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Old 16th September 2022, 11:11   #22
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Re: Purchaser did not repay car loan, guarantor commits suicide

Banks and their collection agencies are vultures. One of my employees had taken a loan and not repaid. Bank called the office number and threatened me with a lawsuit! I was not a guarantor. The loan was given before the person came in my employment. I had nothing to do with the loan. They still had the temerity to accuse me of employing a "chor".

Another time, a colleague at a different organization took loan. As reference he had given names and numbers of couple of other colleagues.Just a reference that they work in the same company. He defaulted, and the bank started hounding the two hapless colleagues just for confirming that they worked in the same company. By that time the person in question had left the organisation.
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Old 16th September 2022, 12:39   #23
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Re: Purchaser did not repay car loan, guarantor commits suicide

My understanding of guarantees are quite different from what folks have mentioned here.

There are a lot of people out there who are "cash rich" but lack documents or IT returns to secure loans.

In such cases there are wealthy professionals/agents who provide loans to such candidates by being guarantors and take a fee from the customer as well as the bank.

Nothong for ordinary folks to get involved in such matters.
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Old 16th September 2022, 12:40   #24
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Re: Purchaser did not repay car loan, guarantor commits suicide

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Originally Posted by greenhorn View Post
My parents had to bear the consequences of .
My family also had to go through a similar issue when my dad stood guarantee to a then trustworthy colleague who was in the habit of accumulating lands before Hyderabad real estate zoomed. He made a bad investment back then in an agricultural land and decided to stop paying the bank to cut his losses. Then the bank started hounding my dad and an other colleague who stood guarantee. My dad and others took the matter to court and filed lawsuits against both the borrower and the bank. The court matter dragged on for years till the early 2000s when land prices zoomed and the borrower decided to clear out the legal muddle around his land by paying the bank back. The cases were dropped as the matter was settled. It was a big inconvenience to go to multiple hearings in court.

From then on it is an unwritten rule in the family to never sign guarantees to outsiders

Quote:
Originally Posted by naru80 View Post
I have experienced this guarantor business first hand.


Fortunately, i had a bindaas coworker, who when she found out about my predicament, told me she met all the criterion and signed the loan docs without even reading the fine print.

But after reading this I'm now going to look her up and take her out for another thank you treat.
You must have some magic with so many volunteering to be a guarantor for you. No one except my parents, sister or brother in law ever stood guarantee for me.

IDBI also played the same game with me when i wanted to buy an agricultural land. I just flatly refused to arrange guarantors but still the manager knowing my net worth and job somehow arranged the loan.

Quote:
Originally Posted by RedTerrano View Post
A friend in need is a friend indeed eh?

Well, one Rajendra Raut was such a friend indeed. When his buddy Kiran Bhatlawande wanted to avail of a loan to purchase a car, he happily signed on the dotted line and stood guarantor.
When their monies are reasonably protected, why insist on an additional guarantor? Is it even legal?
Like other posts have said rajendra raut ji could have been saved if he had proper legal knowledge.
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Old 16th September 2022, 13:39   #25
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Re: Purchaser did not repay car loan, guarantor commits suicide

I feel compelled to answer lot of these questions, as a banker. Many baseless allegations being raised against banks.

1. In the original case posted by RedTerrano, the lender is not a ‘Bank’. It is some private financier from Hyderabad as per the attached newspaper – so using the term Bank itself is wrong.

Also guessing by the fact that Tata Sumo Victa has been out of production for quite some time, it is strange that there is a loan outstanding OR it has to be a used car loan. I'm not sure of the matter, but it doesn't seem like the loan outstanding will be substantial enough to warrant a police arrest and all (what will that car be worth anyway?). For reference, the lender/complainant needs to deposit Rs. 50,000 or so (towards expenses) with the police, to initiate an arrest. I'm not updated on current rates. This is from my initial days in banking - c 2003 or so.
I feel there is more to this case than the car loan, but will have to wait for any further news reports.

2. Banks insisting on Guarantee - The Bank's primary aim while assessing a loan is to ensure that the repayment is guaranteed. Afterall, we are dealing with people’s money and cannot do things on our whims and fancies.

For asset backed loans, where the Bank's finance 75-80% of the asset value (like car loans), we generally do not insist on a guarantor, if we are certain that the asset can be repossessed without much hassle. However, there are always exceptions - certain areas within most cities, where repossessing is not the easiest OR for certain profile of borrowers (say an unmarried youngster, staying in a shared accommodation with friends – he can move addresses or cities quickly). For such cases, the Banks insist on a guarantor so that there is an additional surety. I myself have had my father (who is retired) sign as guarantor for me for one car loan I took in Kerala, since I don't have any permanent address proof there anymore.

Now coming to Nationalized banks, they still follow the tried and tested processes of having a guarantor, because unlike the New Gen Banks, they do not have loan collection or repossession agents. Anyone who has worked in a financial institution will know that repossession of an asset is easier on paper than in real life.

3. Who can sign as Guarantor: Prudent financial institutions, only take guarantee from close blood relatives or employers (or their representatives). Third party guarantors are generally avoided, given there is limited chance of recoverability. Also understand that recovery from guarantor needs litigation. Banks do not prefer litigation. It is time and money consuming process. So loan agents making claims or threats should be just ignored. As a guarantor you will get an order from the court to make the repayment if the principal borrower has defaulted. If you have not signed the guarantee document (only reference) then you can submit that to the court. However, if you have knowingly guaranteed the loan, then you are also obliged to repay it in the scenario of principal borrower failing to do so.

Now More importantly,

3. Loan collection Agencies - these are 3rd parties who are only contracted by the Bank for collection of dues. Do not confuse them with the Bank employees. They are not even authorized to negotiate on behalf of the Bank. Their activities are not strictly regulated by the Reserve Bank of India, though the implied understanding is that the Bank who has signed the contract is answerable for their actions. The fair lending practices prescribed by RBI do mention that Banks should not threaten the borrower or use any unlawful means to force repayment. However, in reality Banks do not have the adequate number of staff to monitor how their contracted agencies work. This problem escalated after the retail loan offtake that India saw in early 2000s. Many of the new generation banks started disbursing 10,000+ retail loans a month; so obviously they couldn't have enough staff to monitor these.
When you are dealing with these agents, remember that they can do zilch to you other than pester you on phone. In cases where the main borrower has defaulted or is not answering their calls, these agents will then call references or even scout social media pages to see who are the close friends and try to establish contact. They will also lie to you that your name is given as guarantor. In such scenarios, ask them to proceed with litigation against you, which they will not be interested in, because their income is a share of the amount collected.

Damn, this turned out to be a very long post – but I hope I was able to clear the misconceptions around some of the comments posted earlier.
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Old 16th September 2022, 13:47   #26
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Re: Purchaser did not repay car loan, guarantor commits suicide

What a tragedy. Both the police and the friend should be behind the bars and a legal action taken against the Bank for such harassments.

Some NGOs / activists should take this case up and make sure all the parties that led to this action be punished and a stricter law comes into place to stop this whole guarantor nonsense.

What has already happened can't be reversed but this tragedy should be turned into a cause to prevent many more such events in the future.

These micro instant loan apps have also caused many suicides (many got banned after several suicide cases). They're the worst since they disburse small amounts but charge exorbitant interest forcing the borrower to keep paying until they can't and that's when they execute their harassment plan.

During the disbursement, they demand contacts' permission and basically force the borrower to allow or they won't disburse which is then misused by blackmailing (yes, literally blackmailing the person) to send various messages/calls to their contacts. Some of these messages are so horrible. They do call as many contacts as they can and try to damage the reputation of the borrower in hopes that this will force the person to clear the dues immediately.
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Old 16th September 2022, 15:46   #27
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Re: Purchaser did not repay car loan, guarantor commits suicide

Once can clearly see that the guy who took his life was certainly a "nice guy", this seems to be the problem with our culture, where we are taught to be nice to everyone even if they don't reciprocate the same.

Little bit of money,knowledge and connections are bare basics to survive here!

RIP brother.
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Old 16th September 2022, 16:11   #28
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Re: Purchaser did not repay car loan, guarantor commits suicide

Do banks still ask for Guarantor? I recently took a car and a home loan (<1 year) and I wasn’t asked for one.

I do remember signing up as a guarantor for a colleague of mine, but way back in 2009-10.
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Old 16th September 2022, 16:26   #29
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Re: Purchaser did not repay car loan, guarantor commits suicide

Yes, being a guarantor is one of the biggest financial mistakes one can make when the borrower doesn’t pay. The best example is my Dad who not once, but he did sign as guarantor for 3 well known persons and guess what - all 3 of them have become defaulters. Not wilfully though, one person lost his business, the other expired and the third put an IP. The burden my dad took for over 15 years is around 1cr. Being a central government employee, every month these deductions are done from his pay and more than half of his salary just got vanished and they are still in recovery mode. It would only be completed the day he retires in June 2024.

The misery is not over yet; during Covid, he became a victim of another phishing scam, where he lost around 5 lakhs from his account. The other person who has put an IP has recovered well and is in better financial status than us but still he just won’t return what he owes to my father.

The biggest learning I had is never to be a guarantor to anyone it doesn’t matter if he is my close friend or relative. I would happy to give them certain amount which I’m ok to lose but not a sign on those papers. Losing money for decades with no fault of yours is just pathetic and irrecoverable financial mess one can have in his life. This is just my perspective others can have contrary opinions.

Thanks,
Rudra

Last edited by libranof1987 : 16th September 2022 at 16:48. Reason: Formatting
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Old 16th September 2022, 19:33   #30
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Re: Purchaser did not repay car loan, guarantor commits suicide

This is nothing but the Bank mafia raj. This is a murder for sure. Pathetic, horrible. I feel very sad for Late Rajendra Raut. He could have raised his concern on social media or to a news channel to get help.

My wife gets calls regularly from several NBFCs & they say that Mr. XYZ has not repaid his loan & he has given your number as secondary contact number.
In the last 2 years we have received at least 30 calls from different NBFCs.
Sometimes those NBFC guys talk very roughly & then I have to jump in to handle them.

But I wonder why none of these NBFCs ever called the given secondary number before disbursing a loan to that man? Did they never check his address physically, his financial track records? Why there is no restriction from RBI on such NBFCs? That guy is getting loan almost every month from a new company & he is not repaying - why there is no online govt / RBI portal where his history can be checked?
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