Lenders use a number of factors (such as your credit score
, the amount of time you have worked for your current employer etc.) in order to help them determine which applicants would present the least risk. If you don’t meet one of these requirements, you might not be able to get approved for a loan despite it being perfectly affordable for you. In such a situation, you could consider enlisting the help of a family member or a close friend to act as a guarantor.
When you ask someone to guarantee your loan, you are asking them to take on your debt if you default on your loan. If you agree to go guarantor on someone’s loan, you become legally responsible for the debt if they become unable to manage their repayments. Crucially, acting as guarantor does not mean “putting in a good word” for somebody, or providing a reference – you are volunteering to repay the loan in full (plus any interest and fees) if the borrower doesn’t.
If you are a guarantor and you apply for further credit of your own, you may need to declare the guarantee on your application.
The guarantor’s credit rating should not be affected unless the borrower defaults and the guarantor then fails to meet a repayment. However if the guarantor applies for a mortgage for example, the size of mortgage they could get might be affected by the guarantor loan, since they could find themselves responsible for that debt at any time.