Being a Guarantor on a Loan can prove good for the borrower as in some cases it is the necessary part to provide a co-applicant to borrow a high value loan. Person who apply as a guarantor has to take extra responsibilities over the entire term of the loan. So, it is better to understand the obligations of the loan guarantor. It is also necessary if the guarantee of loan taken by the other person is shown in the credit report of the guarantor of the loan.

Firstly, signing the loan guarantee documents should not be viewed as a method to please the friend or relative as it is a term commitment on your part. Also, if the borrower fails to pay the loan amount in the given period due to death or some other reason, then you will be required to repay the outstanding amount.

Therefore, it is always better to study the terms of the loan along with the financial situation of the borrower to ensure that whether he/she will be capable to repay the whole amount without any default. Check your Credit Report to assure that in case of default by the borrower,  you will be capable to pay the remaining amount in time. Otherwise, be ready to face the legal action.

According to the Supreme Court’s order the guarantor cannot back out from the commitment midway. And if the terms and conditions of the Loan are changed on the part of the borrower, then guarantor is liable only for the previous terms of the loan.  For example, if the borrower avails top-up loan on his/her current loan, then guarantor is not liable for these changes.

Credit report is the report that shows all the details of your loan amount. The guarantor’s credit report also reflects the money guaranteed by him/her. It also displays the status of the loan repayment by the borrower on a monthly basis. Therefore, it shows all the default on the loan

So, if the borrower defaults on the loan, then consequently on your part to service the debt can affect your credit score adversely. To assure that your credit score is not affected you have not ascertain that debt obligation is being honoured in a timely manner.