It is good to be friendly, however becoming guarantor for another person is taking the friendship too far as thereafter one is responsible to ensure the loan seeker pays the loan at correct time.
The implications of your becoming a guarantor for a loan and your friend defaulting on his loan are as listed below:
(a) In case individual fails to pay loan, the bank or finance institution can force you to pay your friend’s loan being guarantor as once you sign on that dotted line as guarantor you are equally responsible to pay the loan. A guarantor pledges to pay the loan on behalf of a third party. He is infact providing a guarantee to finance institution or a bank that as a guarantor he will honour the loan in case his friend defaults.
(b) The credit card companies or in case you seek loan will check your credit worthiness and if your friend has defaulted in payment, same will be reflected in your credit score and you may not get loan when you desire the same. In case your credit score is not good you may get a CIBIL negative warning as it is a reflection of your credit score available online.
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