Loan Guarantor? Your CIBIL Score Is at Risk

Signing as a loan guarantor feels like a small favour, but it puts your credit score, savings, and assets at serious risk if the borrower stops paying EMIs. Here's what every guarantor must know before saying yes.

Here's what happened: When you become a loan guarantor, the bank can legally recover the entire outstanding loan amount directly from you if the borrower defaults.. Missed EMIs by the borrower show up on the guarantor's CIBIL report too — pulling down your credit score even if you paid all your own loans on time.. Being a guarantor reduces your own loan eligibility because lenders count that liability against your repayment capacity when you apply for a home or car loan..

What you should do: Check your CIBIL report at least once a year to spot any surprise entries linked to loans you guaranteed for someone else.. Before agreeing to be a guarantor, ask the lender for a copy of the loan agreement and understand exactly what you are legally liable for.. If you are already a guarantor and worried about the borrower's repayment, contact the lender proactively to request a status update on the loan account..

Pro tip: You can request to be released as a guarantor once the borrower builds enough credit history or offers alternative collateral — but the lender must formally agree in writing.