What are the risks of a loan guarantee?

In every person’s life, there may be a situation when a friend asks for a loan. It is usually inconvenient to refuse in such a situation, but before agreeing to such a step, you should carefully study everything and consider the possible consequences of such a credit transaction.

Reasons for refusal of a financial organization

Usually, a friend makes such a request when he knows that he will not be able to get the necessary loan amount on his own. Financial organizations may refuse for various reasons: unsuitable age, unstable work, low wages, lack of credit history, refusal of a spouse from a guarantee, and so on.

There may be a great many reasons for rejecting a credit application, but if a financial institution decides to refrain from a credit transaction with a person, it means that information was found during the check that indicates high risks. This should be taken into account before agreeing to take out a loan for a friend.

Problems with payments

Before giving your positive decision and handing over the borrowed funds to a friend, you should consider options for further developments that will be unprofitable for the borrower. There may be situations when a friend asks for a loan, but at the same time does not plan to pay it immediately, because he considers such a burden too much for his income. It is possible that such a friend may have difficulties due to the loss of his or her job during the payment of the loan debt.

There are also situations when the loan is paid regularly for some time, and then the person completely stops servicing the debt, because he lost the incentive. The reasons for this may also be different, for example, a credit vehicle was involved in an accident and can no longer be restored. In this case, the person simply does not consider it necessary to return the money to the bank, because they can no longer use the car. You can’t rule out the possibility of a friend’s death, either.

Regardless of the situation and the reasons why a friend who used borrowed funds stopped paying off his debt, the person who agreed to take out a loan in his own name will suffer from such actions.

Negative consequences for the borrower

By agreeing to take out a loan, the funds from which will be used by a friend, a person can get into trouble. As a result, such a person may lose a friend who will become an enemy. The bank will not understand the reasons for the delay, because it is important for it to constantly receive monthly payments. If such a payment is not received on time to the credit account, the borrower’s credit history is damaged. This is very bad, because in the future if a person wants to borrow money for themselves, it will not be easy to do so. Even if a friend regularly pays for the loan, a person with an already open loan will have problems getting a loan if they suddenly need it to meet their needs.

You should always remember that for a financial organization, the borrower is the person who signs the loan agreement, and therefore the demand will be the same from this person.