Loan Guarantor: Before becoming someone's loan guarantor, know this important thing, after that take the decision...

If you are going to become someone's guarantor, then first you should know some important things. Many times, without any knowledge, people become their guarantors at the request of a relative or a friend. It is wrong to do so. The decision to become someone's guarantor should be taken only after careful consideration. Let us know what are the rules regarding this.

Borrower and Guarantor
     The guarantor is also an equal debtor to the person taking the loan.
     In case of default, banks first send a notice to the borrower, if no response is received then they can also send a notice to the guarantor.
     Although the recovery is done by the bank itself from the borrower, if this does not happen then the guarantor will also be held responsible for the default.

Do all banks insist on guarantors?
     Not all banks insist on guarantors.
     Banks do this when they feel that the guarantee is not sufficient and they doubt the applicant's ability to repay the loan.
     For loans of large amounts, it is necessary to have a guarantor.

Impact on credit score
     CIBIL also keeps records of those giving guarantees.
     The loan you have guaranteed will be considered taken by you.
     If the borrower does not repay the loan, your credit score may get damaged.

Difficulty in getting a loan
     By becoming a guarantor, you may face difficulty in taking loans in the future.
     The amount you guarantee appears on your credit report as outstanding.
     If the person for whom you have taken a guarantee is not paying the money, it may be difficult for you to get a loan.

What to do before becoming a guarantor
     Become a guarantor only for a person whom you know well. Know about the financial condition of the person and find out whether he has ever been a defaulter in the past.
     If you are already a guarantor, then stay in touch with both the person taking the loan and the bank giving the loan.
     The guarantor should check your credit score regularly because if there are any issues, they will be reflected in your score.
     Ask the person for whom you are going to become a guarantor to buy loan insurance cover.

Can one be removed as a guarantor?
     Banks do not allow this until the person taking the loan finds another guarantor.
     Even if a second guarantor is found, it depends on the bank whether it allows it or not.

What to do in case of default?
     You can repay the loan by talking to the borrower.
     The guarantor can recover the money from the borrower later.

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