What is the danger of a loan guarantee?

In each person’s life, a situation may arise when a friend asks for a loan for him/her. To refuse in such a situation is usually inconvenient, but before agreeing to such a step, you should carefully study everything and consider the possible consequences of such a credit transaction.

Reasons for failure of a financial institution

Usually, a friend makes such a request when he/she knows that will not be able to receive the required loan amount on his/her own. Financial organizations may refuse for various reasons; improper age, unstable work, low wages, lack of credit history, refusal of a spouse or surety, etc.

There may be many reasons for rejecting a loan application, but if the financial institution decides to refrain from credit deals with a person, it means that during the check information was found that speaks of high risks. This must be taken into account before agreeing to apply for a loan for a friend.

Payment problems

Before giving a positive decision and handing the borrowed funds to a friend, you should consider options for further developments that will be disadvantageous to the borrower. There are situations when a friend asks to apply for a loan, but at the same time, he does not immediately plan to pay it off, as he/she considers such a burden unbearable for his/her income. It is possible that even during the repayment of the loan debt; such a friend has difficulties due to the loss of his/her job.

There are also situations where sometimes the loan is paid regularly, and then the person completely stops servicing the debt, because he/she lost the incentive. The reasons for this may also be different, for example, credit transport got into an accident and is no longer subject to recovery. In this case, the person simply does not consider it necessary to return the money to the bank, because he/she will not be able to use the machine anymore. We cannot exclude the possibility of the death of a friend.

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

Negative consequences for the borrower

By agreeing to apply for a loan, the funds from which the friend will use, 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 for him/her it is important to constantly receive monthly payments. If such a payment to a credit account is not received on time, the borrower’s credit history deteriorates. This is very bad, because in the future if a person wants to take borrowed funds for him/herself, this will be difficult. Even if a friend regularly pays for a loan, a person with an already open loan will have problems getting a loan, if he/she is suddenly needed to satisfy his/her needs.

It should always be remembered that for a financial organization a borrower is a person who signs in a loan agreement, and therefore the demand will be from that person too.

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