Asking for a loan can be very troublesome: on the one hand, we would like to help our friends’ dreams and goals, and on the other hand, we are afraid of the risks involved. According to data from the Credit Information Bureau, about 300,000 people agreed to become a resident last year. Before you make a decision on guaranteeing a loan, you should be aware of the consequences. We explain whether credit term reduces creditworthiness.
Does maintaining credit reduce creditworthiness? We explain
Unfortunately, a loan surety means that the borrower’s creditworthiness always deteriorates. This does not automatically mean that we will not be able to take out a loan ourselves, but the commitment of a ryrant charges our credit standing to the same extent as our own.
Very often, a person who decides to become a resident is not fully aware of the consequences it may have. Most often, we know the financial possibilities of friends and assume that they will not have any problems paying off their installments, which is why the guarantee will not affect us in any way. From the bank’s point of view, it looks completely different – “creditworthiness” is an assessment of our financial capabilities, and this will deteriorate very much, if ultimately we will have to repay the debtor’s commitment, which we have agreed to in accordance with the contract. For this reason, the bank may refuse us a loan.
Change of guarantor – is it possible?
If reflection comes too late, there are some solutions that will help us improve our credit standing. In some situations, you can change the method of surety – for example, change the surety. In this case, however, you will need the consent of all parties concerned: the bank, the debtor and a new person who will agree to become a resident in your place. It’s not always easy, but it’s worth a try. We should also remember that after repayment of the loan, the borrower’s creditworthiness increases – his credibility also increases in the eyes of the bank.