A loan guarantor can be a family person, friend or colleague who is legally liable to pay off the outstanding loan amount in case if the primary borrower is unable to repay it. Initially, it seems very simple that it’s just a matter of doing signature only but there is lot more to it. If the primary applicant does the timely repayments then there is nothing to worry about but if he starts skipping EMIs then lender can reach out to the guarantor and ask him to pay the outstanding amount. If both the borrower and guarantor fail to Repay the loan then lender can take legal actions against both the borrower and guarantor too. In this article, we have mentioned few things to keep in mind “Being a Loan Guarantor“ that one should not take lightly.

Impact on your Credit Score: When you sign as a guarantor for someone else and the loan is defaulted, it negatively impacts the credit report of guarantor. However, if the applicant is prompt and repay the loan in timely manner then there will be a good impact on both the borrower’s and guarantor’s credit score.

Impact on your assets: In case of default, if the primary borrower is able to repay the loan then lender will initially try to liquidate the borrower’s collateral to recover money. If the borrower denies or escapes out then lender may ask you to pay off the outstanding amount. If you are unable to pay off then lender can seize and liquidate any of your personal asset such as land, property, etc. to recover the loan money.

Impact on the eligibility to get credit: If you are a guarantor for any loan then it will be counted on your open lines of credit, therefore, your personal eligibility will be hampered but if there is default then your credit score will take a hit too. In that case, if you want to “Apply For Any Loan“ then you may face difficulty due to poor credit rating.

Read the agreement clauses carefully: You must always be careful being a loan guarantor with the clauses in loan agreement that what will happen to the obligations of a guarantor in case of default. For instance, in case where the primary applicant dies or partners get separated after divorce, in these circumstances, loan should not be passes onto heirs.

Track the repayments yourself: Always keeps an eye on the repayments regarding the loan for which you have signed up as guarantor. A single default in monthly installments can be reflected in your credit report too, so be attentive and take an regular update regarding the loan repayments.

After reading all this, it is important for you not to take the role of guarantor lightly and be sure and keep these things in mind before signing up the agreement because you cannot back out later till there can be a suitable replacement and the primary applicant should agrees to do so.

Nowadays loans are the survival tool for many individuals as they get you the money at a time of emergency in a hassle free manner. It gives you the benefit of borrowing money with pocket friendly and “Affordable Rate Of Interest“ rather than asking family or friends for monetary help. Another advantage is repayment options where you are in favor of repaying the loan quantum as long as per choice in easy monthly installments known as EMI. One should know about the basic rules to keep in mind before applying a loan to make the loan journey more comfortable.

Affordable EMI of loan: A smart borrower never bites off more than he/she can chew comfortably. So one should take care that loan EMI should never burn a hole in your pocket. Our loan EMI should not exceed from 30% of your total monthly income. If loan to income ratio is in limit, it is always acceptable to lender. If you are unable to maintain the EMIs then it will surely give you a financial burden and mental stress and you will not be enable to focus on other financial goals.

Compare each and everything: Either it is a basic product or any other financial products, we all get active in terms of bargaining and finding the best deal available in market. There are number of banks and NBFCs offering different kind of financial services at different interest rates. The rate of financial product varies from one lender to other. Hence, it is important to compare the lenders and what benefits they are offering.

Do the calculation: The thought of borrowing more money than you need is tempting itself. It might seem to be a smart option but it will generate a burden for rest of the life. Though many of lenders offer money up to higher limits but we should not jump at this thought. It is always advisable to “Apply For a Loan“ and borrow the money equivalent to your requirement and can be easily repaid. Therefore, calculate your finances and then borrow accordingly.

Short tenure: The EMI is lower in the case if borrower goes for a long term loan and can enjoy the tax breaks but the longer tenure ends up in paying more on interest, however, tax benefits brings the effective cost of loan down. Availing a short term loan may not always be possible for everyone because in this EMI is always high. But having sufficient income and benefits from bonuses and incentives, it is the best option to repay your loan in short tenure with increasing EMI.

Check terms and conditions carefully: When you avail a loan, you have to sign a loan agreement consists of terms and conditions regarding the loan and many legal clauses about that particular financial tool. In case you default on loan, lenders have the full authority to take any appropriate action against the borrower but under those terms and conditions.

When you are looking for a loan, you not only go for the loan amount or the interest rate associated with it but also a lender from whom you are “Getting the Loan to Fulfil your Requirements”. With the leading competitions in the lending market, some of lending institute offers the loan that look best first but under the hood cannot be as pleasant as the appearance. To avoid such things a good lender is the must having specific skill set and can be easily recognized. An ideal lender showcases each and every product that is beneficial to the customer with a detailed description associated with the product and services. When the lender provides the convenience to the borrower and services online or any other facility then the lender is ideal for any kind of loan. Lending is a business where there is benefit as well as risks also. So when you are looking for an ideal lender, keep some useful points in mind to recognize the safety of the deal for its clients.