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Thursday, 8 July 2021

Becoming a loan guarantor can make your credit score worse.

 Becoming a loan guarantor can make your credit score worse.


                            Becoming a loan guarantor can make your credit score worse.




Many jobs have been lost during the Corona period and many people's incomes have been affected. Because of this, many people are having difficulty repaying their loans. In such a situation if a borrower cannot pay the loan installments then not only the borrower but also the guarantor has to face difficulties due to loan default. If the loan is not repaid, the credit score of the guarantor will be bad but the guarantor may have to repay the loan as well.


What is the rule regarding loan guarantor?

According to the rules, the person guaranteeing the loan is as liable as the person taking the loan. In case of default, the bank sends a notice to the borrower first and a notice is also sent to the guarantor along with the borrower till the reply is received. The bank will try to recover from the borrower until it happens, but the guarantor will also be held liable for default in case of failure.


When is a guarantor needed?

The bank does not insist on guaranteeing all loans. But when the guarantee is not enough and they have doubts about the repayment of the loan, they ask to do so. It is necessary to guarantee for a large loan.


The guarantor's credit score can be bad

You ask yourself if you can lend to someone else by taking a loan from a bank to the best of your ability. There is no risk in the loan you are guaranteeing. Sibyl not only collects the information of the borrower but also keeps a record of the guarantor. The loan you have guaranteed will be deemed to have been taken by you. In such a case, your credit score may deteriorate if the borrower does not repay the loan.


Becoming a guarantor can make it difficult for you to get a loan

The amount you guarantee will appear in your credit report as a balance. This can affect your ability to get a loan. In such a situation if you decide to take a home, car or personal loan in the future and you have guaranteed a loan to a friend or relative and they do not repay the loan on time then the difficulty may increase for you.


Know the financial status of the borrower before becoming a guarantor

When becoming a guarantor of someone's loan application, keep in mind that you know the person well. Know exactly its position. If possible, also know that the person has never been a defaulter before.


What to do if you have taken a guarantee from someone?

If you are already a guarantor, keep in touch with the borrower and the lending bank. Also, check your credit score regularly. If there is a problem it will appear in your score. The guarantor should insist on buying loan insurance cover from the borrower. In the event of a dispute, the guarantor will not be liable to repay the loan.


What to do to get rid of the guarantor?

If you are a guarantor of someone and want to get away with it now, there could be many reasons for it. As such, you want to take out a loan yourself. However, the bank does not give its approval unless the borrower finds another guarantor. Even after finding another guarantor, it is up to the bank to approve it.

   

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What to do in case of default?

If the borrower is not repaying the loan regularly and the bank asks you to repay the loan, you can repay the loan by talking to the borrower. In doing so the guarantor may later recover the money from the borrower.

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