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Published on Sept 2, 2021Updated on Apr 11, 2025
You may have heard the term, guarantor, which means, a person who is willing to give a guarantee or take responsibility in case of failure or non-completion of a task. And, in the credit market, the term guarantor means, the person who will cover the risks of non-payment of the loan if the primary borrower is unable to do so.
Certainly, it is a big responsibility and carries significant risk to the person who is becoming a guarantor. In general, the person who becomes a guarantor enters into the agreement only in good faith and trust that the borrower will pay back the loan on time.
But, the chances of default by the borrower remains, and in that case, the guarantor has to fill the shoes of the borrower by repaying the loan. The situation, no guarantor wants to get in as it can cause a strain in the relationship, which is quite uncomfortable to deal with.
Therefore, before becoming a guarantor for personal loan, whether it is for friends or siblings, you need to consider the following points.
Must Read: 5 Factors that Can Decide Your Personal Loan Approval
And, in case of default, your credit score is at risk because you need to make monthly EMI payments on time on behalf of the borrower.
If you have decided to become a guarantor for a personal loan to help out your friend or sibling, it’s a good step, but at the same time, you need to be a bit cautious. The following are the few tips you can consider before becoming a guarantor:
Must Read: How to Get a Personal Loan on Aadhar Card & PAN Card?
It’s not a bad idea to become a guarantor for your friend or sibling as it shows your humane side to your loved ones that you really care for them. And, if there is a default by the borrower, don’t panic and take steps to first clear off the debt.
You can consider taking a personal loan online at a lower interest rate and longer repayment tenure and prepay the loan you have taken the responsibility for as a guarantor. It will help you lower the overall financial burden and reduce the risk of a credit score downgrade.
* Please note that this article is for your knowledge only. Loans are disbursed at the sole discretion of SMFG India Credit. Final approval, loan terms, disbursal process, foreclosure charges and foreclosure process will be subject to SMFG India Credit's policy at the time of loan application. If you wish to know more about our products and services, please contact us
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