Loan News: Be it relatives or friends, both are a source of support in difficult times. Saying ‘no’ to loved ones in times of financial crunch makes one feel uncomfortable. It is possible that a friend may need immediate help during a difficult time in business. It is possible that a brother or sister may ask for financial help for some time. A relative may ask you to be a guarantor for a loan because ‘it’s just a formality’ and emotional support often feels like the right thing to do.

But in personal relationships, money matters can get complicated very quickly, because while helping someone out once in a while may not be a problem, repeatedly lending money or guaranteeing a loan without fully understanding the risks can quietly harm your own financial stability.

Why is it risky to be a guarantor?

One of the biggest misconceptions among people, knowingly or unknowingly, is about becoming a loan guarantor. Many people think that their role is only for show. However, it is not like that. When you guarantee someone’s loan, you legally assume the responsibility to repay the loan if the original borrower is unable to repay the loan. If the borrower does not repay the loan, delays payment or does not settle the loan properly, the lender can approach the guarantor to recover the money.

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Not only this, a guaranteed loan can also affect the credit profile of the guarantor and his ability to take a loan in future. This is why financial planners repeatedly advise people to avoid signing guarantee documents due to emotional compulsion. Because this responsibility is very serious both legally and financially.

There is nothing wrong in helping financially

Of course, this does not mean that people should never help their close ones financially. It is common among family and friends to support each other in difficult times. But financial planners stress that such help should be provided within clear limits and with full awareness of the risks involved.

An important thing is whether you can help without harming your financial situation. The second thing is whether the repayment, timelines and responsibilities are discussed openly or are these avoided due to emotions, because often ambiguity harms both relationships and financial condition simultaneously.

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Instant Personal Loan: People often resort to personal loan for small household works or needs. It has become quite easy to get these nowadays. Loan can be applied for within a few minutes through the mobile app and in many cases the money is received quickly. But it also happens with many people that even though their credit score is good, their loan application gets rejected.

In such a situation, the question arises whether there can be problem in getting a personal loan even after having a good CIBIL score? Yes, it is possible, because CIBIL score alone is not enough to take a loan, but other things are also necessary for it. Let us tell.

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Credit score alone is not enough
Generally a credit score of 750 or more is considered good. This shows that you have repaid the loan taken earlier on time. However, loan giving companies do not just look at the credit score, but also look at your entire financial condition.

Salary and EMI are also seen
If the burden of home loan, car loan or other EMIs is already high compared to your income, then there may be difficulty in getting the loan approved. Banks and NBFCs want to ensure that you can easily repay the installment of the new loan.

Job stability is also important
Loan giving institutions also pay attention to your job and employment status. If you change jobs frequently, work on contract or your income is not stable, the loan application may be rejected.

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Do not apply for loan again and again
Many people apply for multiple loan apps simultaneously. Your credit record is checked with every application. Making too many applications in a short period of time may indicate that you need money urgently, which can be a red flag to lenders.

Weak credit history can also be a reason
Sometimes, despite having a good score, you don’t have much credit history. That means you have used very few loans or credit cards before. In such a situation, lenders do not have adequate records of your payment behavior.

Mistakes in documents can prove costly
Incomplete or old documents, wrong bank statement, PAN, Aadhaar or any discrepancy in job related information can also get the application rejected.

Let us tell you that a good credit score definitely increases the chances of loan approval, but this alone is not enough. Income, job, debt burden, documents and your complete financial profile are equally important. Therefore, it is important to pay attention to all these things before applying for a loan.