Life is unpredictable, and anybody can come to a situation where he/she needs alternative help, like taking a loan. But, what happened if he/she is not eligible for the loan and gets helpless? That’s where the role of guarantor comes into place.
If you are also planning to be someone’s guarantor for the first time, you need to know all the pros and cons of being a guarantor. In case you have just started your research on being a guarantor. This article will help you.
If you want to help someone by being his/her guarantor, you should allow the one, but it’s not that out of help, you experience any unwanted situation. Proper knowledge about being a guarantor will help you to pass through it smoothly. Let’s get into the details.
Pros of being a guarantor
1. Being helpful is something peaceful
Associating with a loan seeker will not help him/her and gives you peace of mind that you have been a helping hand for someone. Such is the situation that can uplift you in life. Apart from this, in case you need a guarantor, they can pay you back. Besides, you become the loaner’s favorite person, which means they can help you in your bad times.
2. Banks start trusting you
When the loaner has successfully paid the loan, it benefits him and helps you gain trust from the bank or financial institution viewpoint. When you get banks’ confidence, you likely get the benefits of upcoming offers and even loans at lower interest. If you want to get this benefit, you should become someone’s guarantor.
3. Your credit score increases
Once your loan gets all his loan payments done, he gets the credit score increased. Simultaneously, you also come in with the criteria of getting your credit score improved. It is quite beneficial for you. Apart from this, you become more reliable in other banks and financial entities. Such a worthwhile effort that brings you a lot of plus points!
4. Great relationship
Once you have become a successful guarantor, there are possible chances that you and your loan seeker become good friends, and it can be a long life relationship to cherish forever. Apart from this, you get to learn new things about the financial market.
Cons of being a guarantor
1. You have to pay back the debt
Unfortunately, if your loan-seeker fails in paying the loan amount on time, it can hit back to you. For instance, there are possible chances that you might need to pay back the loan amount. In this situation, you can feel helpless and bounded. Apart from this, you won’t even dare to become anyone’s guarantor in the future. It means you may lose the chance of being a guarantor of a person that is loyal and truthful.
2. You can be in difficulty when you need a loan
If your loan-seeker came out to be an unfaithful person, it could bring a whole lot of problems. You may lose banks’ trust, and you might not get eligible for the loan you need. Also, you may not get back your position in the future. That is why you need to check the loan seeker’s background and then agree to be the guarantor. Thorough research about the loan seeker and even the bank will make your stay on the safer side and avoid future disputes.
3. Your credit score gets negatively affected
Being a lousy guarantor can be one reason why your credit score can hugely negatively affect you. As a result, you cannot be anymore eligible for the benefits and additional offers and bonus points that the banks or other financial institutions provide. So, it is essential that you thoroughly check the loan seeker’s background and track record. Once you decide to be a guarantor, you need to act carefully, and that’s the key.
4. Your relationship gets affected
When such chaos gets curated and so much fuss around you, loaner and bank, there are chances that you do not remain on good terms with everyone. This way, you will lose your important contacts and get huge losses during the process. Also, you might take a lot of time to get over it. You can avoid such harmful effects if you carefully step into every process and carefully read the terms and conditions.
Being a guarantor can bring benefits as well as some difficulties. But, the key is you need to be knowledgeable about what you are going to enter. So, it would help if you educated yourself more about being a guarantor. The details, as mentioned above, will surely help you to decide the best for yourself.