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Risks of being a loan guarantor

Discussion in 'Biashara, Uchumi na Ujasiriamali' started by Prime Dynamics, Mar 21, 2011.

  1. P

    Prime Dynamics JF-Expert Member

    #1
    Mar 21, 2011
    Joined: Dec 30, 2010
    Messages: 521
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    Your friends and relatives may want you to guarantee loans for them. This is a noble thing to do but it can land you in big trouble, like ending up in jail. Before you guarantee a loan for anybody, these are the things you need to look out for in order to minimise the risks of paying somebody’s debts.
    -Sometimes emotions may override your thinking. Men have fallen prey to young ladies. When you guarantee a debt, the debt becomes yours too.

    - Always make an agreement with the person, and make sure the agreement clearly states that he/she is under obligation to pay back his debt. In the worst case scenario, this agreement can help you when you need legal redress or some form of evidence.
    -Before rushing to be a guarantor, find out about the person’s need for the money. You should also determine the person’s ability to pay back.
    - Establish the credit rating of the person. Usually people know those who borrow money and do not pay. Do a background check on the person you intend to guarantee by talking to people who know them.
    - Invite other people to participate in the guaranteeing process so that you do not bear the burden alone in case things go bad. If you are many, you can spread the risks and the damage will be less.

    You should think how long the guarantee will run, how you can end it and if you die or are sick what happens. This will save you unnecessary pain and time.
     
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