Loan Tips: If the loan taker makes a mistake, the guarantor will also have to bear the brunt..

If your CIBIL score is good and your income is also good, then banks give you loans easily. But in some situations, a guarantor is required while taking a loan. Usually, people ask a relative, friend, or close person to become a guarantor. Due to the relationship, the other person is also unable to say no and becomes a guarantor and signs the papers.

But if you think that after signing your responsibility will end, then it is not so at all. Becoming a guarantor means that you have taken the guarantee of the borrower that he will repay the entire loan of the bank. In such a situation, if the person taking the loan defaults, then the guarantor may also have to bear the brunt of it. Know here what loss will the guarantor suffer if the loan taker is unable to repay the money.

When does the bank ask for a guarantor?

The bank asks for a guarantor when the loan amount is very high and the bank is worried about whether the money will be returned or not.
The loan taker's documents are not complete.
The loan taker's previous loan repayment record (credit score) is bad.
The loan taker is old or his job is such that the income is not certain (risky).
Sometimes the bank has a rule that a guarantor is required.

What is the responsibility of becoming a guarantor?
You may think that repaying the loan is only the loan taker's job, but you are equally responsible for the bank. That is why you are asked to sign a paper.
If the loan taker does not repay the money, the bank first sends him a notice. If there is no response, it sends a notice to you (the guarantor) as well.
If the loan taker is unable to repay the money, you may have to repay that loan.
Bad effect on CIBIL score

Another disadvantage of becoming a guarantor is that if the loan taker does not repay the money, then that loan will also be visible in your credit report. This spoils your CIBIL score. With a bad CIBIL score, if you ever want to take a loan yourself, then it will be difficult. And it is possible that you will not be able to become a guarantor for someone else soon.

Can a guarantor back out of his responsibility?

If you think that after becoming a guarantor, you can easily back out, then it is not so. There are very few ways to back out. You can back out only when the bank agrees. The bank will agree only when the loan taker makes some other solid arrangement to repay the loan.

What should be done?

Before giving a guarantee to someone, understand well whether that person will be able to repay the loan or not.

Also, tell the loan taker to get the loan insured (loan protection policy).

By doing this, if something unfortunate happens to the loan taker (like death or loss of job), the insurance company will repay the loan, and you will be saved.

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