Sometimes just to help friends and relatives, we become guarantors for their bank loans without knowing the legal aspects. If you become a loan guarantor for another, it has many financial meanings. In such a situation, when the borrower does not make a repayment, there may be serious consequences for the guarantor. If the borrower is not able to pay the loan amount, the repayment responsibility falls on the guarantor. So before you are a guarantor, you have to think that you will have so much money to repay the loan.
The amount for which you will be guaranteed will appear as an outstanding liability in your credit report. This will affect your loan eligibility if you decide to take home, car, or personal loan in the future. As well as your friends or relatives, you can use it. Any delay or default, you will have a negative impact on your credit score in fulfilling your obligations on a relative's loan. Despite all the above things, if you decide to become a guarantor in the loan to avoid spoiling the relationship with your friend, you should do some things to protect your interest. You can find your friend/friend. The relative may suggest buying a loan protection scheme so that the loan repayment will be made by the insurance company in the unfortunate event of death or disability of the borrower.
In addition, you can suggest the borrower has more than one guarantor, and your guarantee will only be up to the extent of your savings and income. By doing so, you need to be your friend/friend in times of need. Will be able to help the relative as well as your own borrowing limit will not be bound by the outstanding liability of the guarantee when you plan to take a loan yourself.
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