Should You Be a Personal Loan Guarantor for a Sibling or a Friend?

Should You Be a Personal Loan Guarantor for a Sibling or a Friend?

So, your friend or your brother/sister has been requesting you to become a guarantor when they apply for a personal loan.While you absolutely love and care for this person, becoming a personal loan guarantor is a major decision. It is going to put your credit score and financial health at stake. Thus, it is understandable if you are thinking twice about it.

Should you take the plunge and agree to their request, or back away from becoming a guarantor? Read on to find your answer!

Questions to ask yourself before becoming a personal loan guarantor

  • Is the borrower creditworthy enough?

Regardless of whether the borrower is a person close to you, it is important to check their creditworthiness and ability to repay their loan on time. You can go ahead if you’re satisfied with these aspects. 

  • Why does the borrower need a guarantor?

Personal loans are unsecured loans that do not need any guarantor or collateral. Thus, you need to figure out why the borrower needs a guarantor. If the lender has asked for a guarantor due to a high debt-to-income ratio or low credit score, you need to rethink the idea of becoming a guarantor.

  • Do you have a contingency plan?

Even when you know that the borrower has the capacity to pay the loan back on time, you need to keep a contingency plan. Otherwise, the burden will be completely on you in case of non-payment. So, make a plan regarding how you are going to repay that loan in case of default. You can ask them to use the personal loan eligibility calculator to analyze their situation before taking the loan.

  • Did you check the loan amount?

Before you become a guarantor, take a look at the amount that the borrower is applying for. In case the loan amount is more than your general level of monetary comfort, you must not go ahead and become a guarantor.

  • What about your creditworthiness?

You also need to assess how it is going to affect your creditworthiness. After all, if you need a loan for yourself during this loan tenure, the credit report will show you as a guarantor. It might affect your capacity to secure a loan for yourself. If the borrower defaults, you will put your credit score at risk as you will have to pay monthly EMI payments timely on the borrower’s behalf.

Safeguarding yourself when becoming a personal loan guarantor

If you have made up your mind about becoming a personal loan guarantor, you need to know the ways to safeguard yourself. First off, read that loan document closely to understand all the terms and conditions. Next, it is your responsibility to ensure that the borrower is paying the EMI right on time.

If you are still not feeling too confident about becoming a personal loan guarantor, you can always get a co-guarantor to reduce the risk of total financial loss. At the end of the day, you should only agree to becoming a guarantor to someone you can completely trust.


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