Symbolic picture
Along with the papers to take a loan from any bank, one thing is necessary. That is guarantor. If you also become a friend or relative’s guarantor without thinking, be careful. Because you may have to bear the brunt of this.
The simply means of becoming a guarantor means that it is your responsibility to repay the loan taken. If the one who took a loan is not able to fill his installment on time. If that defaulter is declared, then the guarantor also comes to notice.
These are the disadvantages
It is the responsibility of the person who takes a loan to repay the loan installments from time to time. But, when he is unable to repay the loan, then this default may affect your credit score. Therefore, it is very important to know the income of the person in front before becoming a guarantor. Because due to this, if your credit score is bad, then there may be a problem in taking a loan for yourself in future. Also, more interest may have to be paid on the loan.
Being a guarantor is not a simple decision, because the bank includes this loan in your total credit limit. If the borrower is declared bankrupt for some reason, even if he gets relief from repaying the loan, the guarantor has to pay the entire amount with interest. Also, it is not easy to be free from the responsibility of the guarantor, until the loan is completely repaid or the bank gives written permission.
Can also benefit
Nevertheless, there are some benefits of becoming a guarantor. With this you can help one of your loved ones. Also, if the borrower is responsible and repays the loan on time, your credit score may be better. Therefore, if you are thinking of becoming a guarantor, take care, check your credit score regularly and take advice of a financial expert.