You need to be wary of guaranteeing a loan. What would you do if a friend or relative asked you to guarantee a loan? You would probably like to help them by agreeing to guarantee
loan but consider your actions carefully first and make sure you understand what it involves. You are being asked to guarantee a loan. Think carefully before you do. If borrower does not pay debt, you will have to. Be sure you can afford to pay if you have to, and that you want to accept this responsibility.
You may have to pay up to full amount of debt if borrower does not pay. You may also have to pay late fees or collection costs, which increase this amount.
The creditor can use same collection methods against you that can be used against borrower, such as suing you, garnishing your wages, etc. If this debt is ever in default, that fact may become a part of your credit record.
Studies of certain types of lenders show that for guaranteed loans that go into default, as many as three out of four guarantors are asked to repay loan.
If you guarantee a loan and your friend or relative misses a payment, lender can immediately collect from you without first pursuing borrower. In addition, amount you owe may be increased - late charges - if lender decides to sue to collect. If lender wins case, your wages and property may be taken.
