{
  "id": 5246806,
  "title": "Can being a loan guarantor hurt your credit score?",
  "url": "https://urgent.news/2026/09/03/can-being-a-loan-guarantor-hurt-your-credit-score",
  "topic": "business",
  "section": "Business",
  "published": "2026-09-03T03:56:59.000Z",
  "source": {
    "name": "The Economic Times",
    "slug": "the-economic-times",
    "url": "https://economictimes.indiatimes.com/wealth/borrow/thinking-of-guaranteeing-a-loan-think-again-heres-how-your-credit-score-could-suffer-if-the-borrower-defaults/articleshow/133724425.cms"
  },
  "original_language": "en",
  "account": "Being a loan guarantor can have potential implications for your credit score. While simply becoming a guarantor does not directly reduce your credit score, the guaranteed loan will still appear on your credit report. This can impact lenders' evaluations of your borrowing capacity, even if you are not the primary borrower.\n\nThe risk of a negative effect on your credit score arises if the primary borrower fails to make timely EMIs or defaults on the loan. In such cases, the guarantor's credit history may be impacted, which could make future borrowing more difficult or expensive.\n\nIf the borrower stops paying, the lender will typically first pursue the borrower for repayment. However, if the borrower defaults, the guarantor's liability can arise depending on the terms of the guarantee agreement. Under Indian law, the guarantor's liability is tied to the full amount under Section 128 of the Indian Contract Act, 1872.\n\nThe specific extent of the liability depends on the terms of the guarantee agreement. It is crucial for the guarantor to understand whether the guarantee covers only the principal amount or also includes interest, costs, and other charges.\n\nSecured loans, such as home or vehicle loans, carry different risks compared to unsecured loans like personal loans. In a secured loan, the lender has security over an underlying asset, and if the borrower defaults, the lender can enforce its security through legal mechanisms like the SARFAESI Act. In contrast, unsecured loans do not have a specific asset pledged as security, and the lender may rely on collection measures and legal proceedings to recover the dues.\n\nBecoming a guarantor can potentially reduce your chances of getting your own loan, even if the borrower is consistently making timely EMIs. Lenders consider your existing financial commitments, income, and credit history when assessing your creditworthiness. If the borrower defaults, you may be held liable for repayment, which can impact your overall borrowing capacity.\n\nBefore becoming a guarantor, it is essential to consider several factors. First, ensure that you trust the borrower and are confident that they can repay the loan. Next, review the total loan amount, tenure, and interest rate to understand the financial commitment involved. Determine whether the guarantee is limited or unlimited, and whether it covers only the principal or extends to interest, costs, and other charges.\n\nYou should also check for a continuing guarantee clause, which may extend your liability to future borrowings. Beware of one-sided variation clauses that could change the terms of the underlying arrangement without your consent. Finally, review the borrower's financial position, including their credit history, income, and existing EMI burden, to assess the risk of potential default.",
  "summary": null,
  "key_points": [],
  "editors_take": null,
  "illustration": null,
  "coverage": {
    "outlets": 1,
    "also_reported_by": []
  },
  "ai_generated": true,
  "disclaimer": "Summaries, key points and the editor’s take are written by software from other outlets’ reporting and may contain errors — always check the linked original."
}