Absolutely, if you say someone's good for a loan and they end up not paying it back, that makes YOU look bad.  Your name and reputation are on the line.  It's like you promised everyone "Trust me on this dude" and then dude flakes out and leaves you high and dry.  Not a good look. 

So why even vouch for somebody if youre not positive they're responsible enough to repay on time? Doesn't make much sense to put your own credibility at risk for some random buddy you hardly know and  you gotta have faith the person will handle it right or there's no point sticking your neck out.  Really, you should only vouch for people you truly believe in and feel confident will do the right thing.