Compare homeowner guarantor loans

With a homeowner guarantor loan, you could borrow money by applying with a guarantor who owns property.

Compare guarantor loans

Table: sorted by representative APR, promoted deals first
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Name Product Ratings Customer rating Finder score Total Payable Monthly Repayment Representative APR Link
Norwich Trust Limited Unsecured Homeowner Loan
Finder score
★★★★★
Not yet rated
★★★★★
Expert analysis
View details
Representative example: Borrow £15,000.00 over 3 years at a rate of 27.9% p.a. (fixed). Representative APR 27.9% and total payable £21,430.80 in monthly repayments of £595.30.
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It may be worth considering a homeowner guarantor loan if you’re finding it difficult to obtain a personal loan because of your credit history. A guarantor is a friend or relative willing and financially able to back you and promises to repay the loan if you cannot.

With this type of loan, it doesn’t matter whether you (the borrower) are a homeowner, but it does require your guarantor to own their own home or to have a mortgage.

These types of loans usually charge a higher interest rate than traditional personal loans because of the perceived increased risk to the lender and the complications of adding a guarantor.

What is a guarantor loan?

Someone with a poor credit rating often struggles to obtain traditional personal loans. A guarantor loan is a personal loan guaranteed by a friend or relative – known as a guarantor – who usually has a better credit rating and promises to honour any debt if you, the borrower, default on your payments.

If the borrower can’t pay the loan, the guarantor takes over the repayments until the loan is paid off.

What is a homeowner guarantor loan?

With a homeowner guarantor loan, a borrower with poor or limited credit can obtain a loan by applying with a friend or relative who owns property and promises to step in if the borrower cannot repay the loan.

A homeowner guarantor loan requires the guarantor to own their home outright or have a mortgage. Ideally, they shouldn’t be a first-time buyer with only a short period on their mortgage. The loan is not usually “secured” on the property, but the lender generally considers the guarantor, as a homeowner, a safer prospect.

The interest rate charged depends on a range of factors, such as the loan amount, the duration and the borrower’s and guarantor’s financial circumstances (including the amount of equity in the property). It is likely to be higher than a mainstream personal loan but lower than a guarantor loan where the guarantor is not a homeowner.

Late repayments can cause you serious money problems. See our debt help guides.

Why take out a homeowner guarantor loan?

If you’re planning a big expense or looking to consolidate an existing debt, you may want to take out a personal loan. However, if your credit score prevents you from accessing most traditional personal loans, then a homeowner guarantor loan could be an option.

Asking a friend, family member or work colleague to be a guarantor is a big commitment, and it could impact their credit history or financial situation if you default on your repayments.

What should I look for in a homeowner guarantor loan?

When it comes to comparing homeowner guarantor loans, there are some key features to look for. Ask yourself these questions before deciding on a loan.

  • Do we qualify for this loan? Don’t waste time applying for a loan if you and your guarantor don’t meet the requirements.
  • Can I borrow the amount I need? Will you be able to borrow the amount you need, and will you be able to pay it back in a reasonable amount of time? If not, you might want to look elsewhere.
  • Does it have a competitive interest rate? Most guarantor loans charge a fixed interest rate, meaning your monthly repayments stay the same throughout the loan. Remember that the advertised rate is not necessarily the rate that the lender will offer you. Lenders look at factors such as the credit score and income for both you and your guarantor, as well as your (the borrower’s) expenditure, when deciding what rate to offer you.
  • Can I make overpayments or repay the loan early? Most lenders will not penalise you for paying back some or all of the loan early. However, that does not necessarily mean that doing so will save you money in interest. In many cases, you need to pay 1 or even 2 months of interest to settle your loan early.
  • How long will I have to pay it back? Aim for a loan term that gives you monthly repayments you can afford without being too long. Otherwise, you could wind up paying a lot in interest in the long run.
  • Are there any fees? Most lenders don’t charge fees on guarantor loans, but it’s always good to check.

Applying for a homeowner guarantor loan

To secure a homeowner guarantor loan, there are a number of criteria you need to meet. If you are a homeowner yourself, have you checked whether a guarantor loan is really your best option? Have you considered remortgaging instead?

Criteria for the borrower

  • Aged between 18 and 75.
  • Either working full-time, part-time or for an agency; self-employed or a pensioner.
  • UK resident.
  • Holds a UK bank account.
  • Able to afford the loan.

Criteria for the guarantor

  • Aged between 21 and 75 (although some lenders have a minimum age of 18).
  • UK resident.
  • Has a good to excellent credit rating.
  • Owns a residential property outright or has a mortgage on one.
  • Can afford the payments if the borrower can’t.
  • Not the partner or spouse of the borrower.
  • Comfortable to act as guarantor and understands the commitment they are undertaking.

Thinking about becoming a guarantor?

If a friend, relative or work colleague has asked you to be a guarantor, there are some things you must consider before applying.

  • Do you trust them to make all the payments on time each month?
  • Are you sure the borrower can afford it?
  • Are you comfortable taking over the payments if something goes wrong?

The application process

Do your research and compare loans before applying, and make sure both you and your guarantor meet the eligibility criteria. The application process usually goes as follows:

  1. Borrower fills in details and signs agreement.
  2. Guarantor fills in details.
  3. Lender checks both the guarantor’s and the applicant’s credit score and ability to pay off the loan.
  4. Guarantor signs agreement.
  5. Lender may contact the borrower, guarantor or both over the phone to discuss affordability.
  6. Lender officially offers the loan once the lender is satisfied with both parties.
  7. Borrower accepts the loan offer.
  8. Lender issues the funds to the guarantor, who can then transfer the amount to the borrower.

Many lenders aim to complete and approve an application within 48 hours.

What documents do you need to open a personal loan?

Pros and cons of homeowner guarantor loans

Pros

  • Better interest rates.
  • Larger loan periods.
  • Longer terms.
  • Overcome bad credit.
  • More likely to be accepted than a non-homeowner/tenant.
  • Generally no fees.
  • Unsecured so the guarantor’s home is not at risk.

Cons

  • Need to find a guarantor with good credit and a home.
  • Rates still higher than traditional personal loans.
  • Rates/approval likely to depend on amount of equity in the property.

The bottom line

A homeowner guarantor loan can be a suitable option for borrowers with poor or average credit scores who might not qualify for a personal loan from traditional lenders, albeit they do often come with higher interest rates. This loan relies on a guarantor who will be responsible for any debt if the borrower defaults on repayments.

The guarantor and borrower must both fulfil certain eligibility criteria. Specifically, the guarantor must be a homeowner or have a mortgage.

Frequently asked questions

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you. Most of the data in Finder's comparison tables has the source: Moneyfacts Group PLC. In other cases, Finder has sourced data directly from providers.

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