Before obtaining large loans from the bank or co-signing for someone else, you should realize the seriousness of the situation.
When you co-sign a loan, you are legally responsible for repaying it. Under Section 126 of the Indian Contract Act 1872, the co-signer is equally liable for the loan.
If the primary borrower encounters difficulties repaying the loan, the co-signer is responsible for making the payments. It’s crucial to understand that when you sign as a witness or guarantee, you enter into a binding contract.
If the government employs you, the bank may deduct the EMI directly from your salary or notify you about the possibility of auctioning your property.
Furthermore, your CIBIL score will be negatively affected, potentially making it difficult for you to secure personal loans in the future.
Therefore, it’s essential to fully comprehend the financial implications before co-signing any loan agreements.