People take loans from banks or non-financial institutions to buy a house or a vehicle. In the loan process, banks often make another person a guarantor. Most people repay the loan on time, but some people are unable to do so. The reasons for this can be different; some default due to compulsion and some deliberately. When a person is unable to repay the principal and interest of his loan, he is declared a defaulter, which affects his financial situation. (bank loan news)

Many difficulties can be faced when a person is declared a defaulter. This affects the credit score and there is difficulty in taking a loan in the future. Apart from this, if any property is mortgaged in the bank to take a loan, then it can be seized and auctioned.

If the loan taker does not repay the money, the bank contacts the guarantor-

If the loan is not repaid, the bank first sends a notice to the person taking the loan. In this, he is asked to repay the outstanding amount. After this, the bank contacts the guarantor. While giving the loan, an agreement is made with the guarantor, and in this, in case the loan taker does not repay the money, the guarantor will repay the loan. Although banks recover from the borrower only, if this does not happen, the guarantor will also be held responsible for the default.

Keep these things in mind before becoming a guarantor-

You should become a guarantor of only that person whom you know well. Along with this, you should know about the financial condition of that person. Also, find out whether he has ever been a defaulter before. Along with this, ask the person for whom you are going to become a guarantor to buy loan insurance cover so that he does not have to face any problem in the future.

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