Thursday, August 25, 2016

What Are the Legal Implications of Standing Guarantee For Others?

Actual Question:

My friend buying a car and telling me to be a guarantor of her finance loan. Does there any problem in future for me? He telling me there will no problem for me in future. I don’t know any thing about finance. He is my good friend.

You could have a problem if she defaults on her loan repayments. Then the lenders will approach you for recovering the dues. Standing as guarantor is accepting responsibility for the loan of others in case they are unable to repay.
Every bank normally insists on guarantees. Usually spouses, parents and natural relatives stand guarantee for loans.
You have to make a judgement whether your friend a reliable person, committed to and having the means to repay the loan even if her job is temporarily lost. Generally prudent persons, leading simple lifestyles and who Control the Urge to Splurge to Become Financially Free will have means to repay even in bad financial times.
You also have to consider that you also may stand in her position in life some times and may need someone to stand as surety for you.
So it is a situation calling for judgement and a balanced approach in life.

Please Note: This is a reproduction of the question I had answered on the website ‘Quora’, which I thought could be useful to the visitors to this blog site also.

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