In this run-down world, sometimes just to help friends and relatives, we become guarantors for their bank loans without knowing the legal aspects. If you become a guarantor of a loan to someone else, it has many financial implications. When the borrower does not repay, there can be serious consequences for the guarantor.
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If the borrower is unable to pay the loan amount, the responsibility of repayment falls on the guarantor. So before being a guarantor, you have to think that you will have so much money to repay the loan.
The amount you will guarantee will appear in your credit report as an outstanding liability. This will affect your loan eligibility if you decide to take home, car or personal loan in future. Also, any delay or default by you in fulfilling your obligations on the loan of your friend/relative will have a negative effect on your credit score.