Now to my question. If you "vouch" for someone that they are trustworthy and they take a loan, is the person who vouched putting their reputation on the line?
Yes, if you are vouching for someone then you will be responsible for the dealings. Let say if you vouched for someone that he's a trustworthy person and he pays loans on time, and after your vouch a lender agrees to give that person a loan.
That person has got the loan because you vouched for him and the lender trust you not that person, if he somehow doesn't pay the loan back then the one who vouched will be responsible. And, there is big chance that the one who vouched may end up paying the loan if other party run away.
On this forum we can see so many members run away after taking loans, Sashan's lending thread is a good example for us to see such people. I believe one should try his/her best to not vouch for someone else because if the other person doesn't pay the loan then it can impact the reputation of the one who vouched for that person.