Loan Guarantor: Many times, when a close friend or family member of ours needs to take a loan, we become a guarantor without any hesitation. If you also do this, then be careful immediately; otherwise, doing this may prove costly for you.

Becoming a guarantor means that the guarantee of repaying the loan being taken is on you. If your credit rating is good, then considering you as a guarantor, the loan is also passed without any reluctance.

Your credit score may get affected

Now it is the responsibility of the person taking the loan to pay the loan installments with interest from time to time. If he is unable to do so, then as a defaulter, a notice is first sent to the guarantor and he is expected to pay the loan amount.

This default can also affect your credit score, so before becoming a guarantor, you should always keep in mind that you know the person for whom you are becoming a guarantor very well and you have enough faith in him that he is capable of repaying the loan on time. If your credit score deteriorates, then in the future you may face problems in getting a loan or you may get a loan at a higher interest rate.

You will be held responsible

Becoming a guarantor is not that easy because the bank will count this loan in your total credit limit. If in any situation the borrower is declared bankrupt, then even if he gets exemption from repaying the loan, the guarantor will have to pay the entire amount along with interest. It is also not easy to come back from becoming a guarantor, unless the loan is fully repaid or the bank gives exemption in writing.

Benefits of becoming a guarantor

However, becoming a guarantor has its own benefits. One is that it helps someone close to you. It is possible that your credit score may also get upgraded. If you become a guarantor for a responsible person and he repays the loan on time, then it will affect your credit score. In such a situation, if you want to become a guarantor for someone, then of course you can become one, but keep checking your credit score from time to time or take advice from an expert.