Becoming loan guarantor can affect credit score, borrowing capacity

Acting as a loan guarantor can hurt your credit score and future borrowing ability if the primary borrower misses payments or defaults, experts warn. The loan appears on the guarantor's credit report immediately, affecting their debt-to-income ratio. Delayed payments or default can lead to loan rejection or less favourable terms for the guarantor.

Shakti Sekhawat of BharatLoan said timely repayments may not harm the guarantor's credit score, but delays or defaults can. Raj P Narayanam of Zaggle advised asking if you are prepared to repay the entire loan before signing. Rohit Mahajan of plutos ONE said a guarantor takes effective responsibility for someone else's debt and should never view the role as just signing a document.

Experts urge guarantors to assess the borrower's repayment capacity, understand loan terms and consequences of default, and treat the commitment as seriously as taking a personal loan. Kuldeep Yadhuvanshi of Rupee112 said individuals should be financially prepared to take on the repayment obligation if needed.