Loan Guarantor: The guarantor of the loan is called the person who has the legal responsibility to repay the loan in case the borrower does not repay the loan.
Loan Guarantor: Many times when your relatives or friends go to take a loan for their needs, they make you their guarantor. There can be dire consequences for the guarantor when the borrower does not make the repayment.
Have you ever wondered what is the risk involved in becoming a guarantor of someone’s loan and what kind of loss you can get from it. Let us know about this today.
This is a loan guarantor
The guarantor of the loan is said to be the person who has the legal responsibility to repay the loan in case the borrower does not repay the loan.
This means that if the borrower is unable to repay the loan, then the loan guarantor has to pay the loan. The bank does not have full confidence in the borrower that he will be able to repay the loan.
In such a situation, the bank demands additional guarantee. While becoming a guarantor, you have to give complete information about your income and assets to the bank. This means that you know the meaning of becoming a guarantor and are becoming a guarantor only after thinking carefully.
pay attention to these things
Before becoming one’s loan guarantor, get to know about the financial condition of the borrower, past track record and the reason for taking the loan.
If you have any doubts, you have two ways. One, you can refuse to be a loan guarantor. After becoming a guarantor, you cannot escape from your responsibilities. This is possible only if both the borrower and the bank agree with your application.
These are the risks of becoming a guarantor
- If the borrower defaults on the repayment, then the bank will contact you for this.
- If you are not able to repay the loan of that person or do not do it yourself, then the bank can confiscate your assets.
- The amount for which you will guarantee will appear on your credit report as Outstanding Liability.
- Being a guarantor also affects your credit score.
Once you become a guarantor?
If you decide to become a guarantor in the loan so that the relationship with a friend does not deteriorate, then you should do some things to protect your interest.
You can suggest your friend/relative to buy a loan protection plan so that in the unfortunate event of death or disability of the borrower, the loan will be repaid by the insurance company.
Also, you can suggest the borrower to have more than one guarantor, and your guarantee will be only to the extent of your savings and income.
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