What are the risks while signing up as loan guarantor? Check it out


Becoming a loan guarantor means that any delay in the repayment of the loan by the borrower will also impact the credit score of the guarantor. This in turn will impact the future ability of the guarantor to apply for credit cards or loans themselves.

What are the risks while signing up as loan guarantor? Check it out here

Representational image. PTI

If you are signing up as a loan guarantor for a friend or close family member, you might be thinking that you are doing them a minor favour. However, that is not the reality. There are several risks associated with signing up as a loan guarantor. If you are unaware of them and have signed up as a guarantor, take care to avoid these risks or you may end up losing both your money and a close relationship as well.

The first thing you need to understand is that lenders ask for a loan guarantor if they are unsure of the borrower’s capacity to pay back the money. In other cases, a loan guarantor is also asked if the borrower has an inadequate credit score or a risky job profile. Before signing on as the guarantor, you must be reasonably sure that the primary applicant will be able to repay the loan.

You should also keep in mind that it is not easy to exit from the role of a guarantor once you have signed off on the papers. You must consider these factors thoroughly before becoming a guarantor.

Here are the risks associated with becoming a loan guarantor:

Loan repayment liability:
If the primary applicant is unable to pay the loan, the guarantor will be held liable for the timely repayment of the money. The lender will first pressurise the guarantor for timely repayment by the primary borrower. In case the borrower defaults on the loan amount, the guarantor would be liable to pay the lender the outstanding dues, along with the other charges.

Impact on credit score:
Becoming a loan guarantor means that any delay in the repayment of the loan by the borrower will also impact the credit score of the guarantor. This in turn will impact the future ability of the guarantor to apply for credit cards or loans themselves.

Impact on eligibility for loans:
If you become a loan guarantor, the outstanding amount will be considered a liability for you as well. This in turn will reduce your eligibility for a loan.

You should be in regular touch with both the lender and the primary borrower so that you do not miss out any information related to the loan repayment. Also, ask the primary applicant to take loan protection insurance plans for mitigating liabilities.

Read all the Latest News, Trending NewsCricket News, Bollywood News,
India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.





Supply hyperlink

Leave a Comment

%d bloggers like this: