A poor or limited credit history could affect your ability to obtain a personal loan. However, if you can find a friend or family member to act as your guarantor, you may still be able to borrow money.
A guarantor loan is a personal loan that is guaranteed by a friend, relative or work colleague of the borrower. The guarantor will usually need to have a very good credit rating and will promise to honour any debt if you, the borrower, default on your payments. In this situation, the guarantor will have to take over the repayments until the loan is paid off.
If your credit score is all that’s standing between you and a perfectly affordable loan, applying with a guarantor can help get your application across the line.
It’s crucial to understand that being a guarantor does not mean “vouching for” the applicant or simply providing a reference – the guarantor is actually volunteering to pay off the loan if the applicant does not.
Asking someone to be your guarantor is a big decision for both the borrower and the guarantor. As an applicant, you’re asking the guarantor to risk their financial situation to help you secure credit.
Your guarantor will need to have good credit and be able to afford the loan repayments. Perhaps they own their own home, but they could also be renting, a tenant or living with family. Their homeowner status can affect which type of guarantor loan you’re able to apply for, depending on the lender. Guarantor loans with a guarantor who owns their own home or has a mortgage tend to come with better interest rates than non-homeowner guarantor loans.
A borrower and a guarantor need to have a close and trusting relationship, where they can talk openly about their financial situations. The guarantor needs to know the borrower can afford to make the monthly loan payments so they won’t have to use their own money to pay off the borrower’s debt. However, the guarantor will need to have the finances available should the borrower run into problems with their repayments.
When looking for a guarantor, it’s a good idea to have at least two people in mind. It’s more often the guarantor’s circumstances (not the borrower’s) that lead to an application being declined.
Applying for a guarantor loan is a big commitment for both parties, which could impact their credit reports and financial situations.
Guarantor criteria can vary from lender to lender, but will typically include the following requirements.
To make it even easier to compare and evaluate unsecured loans we came up with the Finder Score. Speed, features and flexibility across 60+ lenders are all weighted and scaled to produce a score out of 10. The higher the score the better the lender – simple.
Read the full methodologyPlease note: You should always refer to your loan agreement for exact repayment amounts as they may vary from our results.
Late repayments can cause you serious money problems. See our debt help guides.
If a friend, relative or work colleague has asked you to be a guarantor, there are some things you must consider before applying.
We sat down with the UK’s biggest guarantor lender to learn where applications can fall down.
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How to secure a guarantor loan the same day. Compare live rates, fees and eligibility criteria and apply online.
Find out which UK lenders offer guarantor loans for homeowners and non-homeowners. Compare and find out how to apply.
Looking for a homeowner guarantor loan? Learn all you need to know about how they work, lending criteria and how to apply online.
Looking for a non-homeowner or tenant guarantor loan? Learn all you need to know about how they work, lending criteria and how to apply online.
