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.

What Investing Options Exist for a 42 Year Old with Investible Surplus of Rs.3000 Per Month?

Full and Actual Question:

As a 42 years old with a family of 4, earning ₹ 22k per month how to invest more with a debt of 5k,10k for house rent, and 4k other expenses?

Dear Mr.Daniel Paul!

You seem to have an investible surplus of Rs.3,000 per month which is decent. Your present age of 42 also decent enough with an active investing life of about 23 years and another 10-15 years even if you do not invest you keep live your past investments, although it would have been great if you had asked this question when you were 22 instead. So keep a target of of 75 to 80 years as investment life which is great.

Try to get rid of your debt repayment obligation of Rs.5000 per month as soon as possible and after that try to avoid borrowing money. Please destroy the credit card(s), if you have any, immediately.

Your present budget seems to be very tight. Your expenses are not high but your income is very limited. Can you try for a second job that may boost to your investible surplus by another Rs.5000 to 10000? This can be very helpful. If you manage to earn this extra income, please do not destroy it on luxuries like car, holidays and eating out. Use the extra money for investment only.

Open a SIP or invest in an Exchange Traded Fund (ETF) for the next 23 years. Do not stop this investment for any reason whatsoever.

If you follow this simple advice keep invested for the time frame suggested, when you look back at the age of 65 you would have accumulated a net wealth of Rs.40.46 lakhs, after an assumed annual inflation of 10%, which is very high and long term stock annual market returns of 15% which is very reasonable.

If you keep the investment alive, without disturbing for another 20 years, you would have become a really rich and wealthy person with a net wealth of Rs.5.04 Crores. Please see the calculations below:

Returns From Humble Investments

How such spectacular results are possible out of such humble investments of Rs.3000 per month? That is the power of SIP and Miracle of Compounding.

Happy Investing and Getting Rich!

Anand

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.