If you're struggling to obtain a personal loan, applying for a guarantor loan could be an option. Here's all you need to know about finding a guarantor who is willing and able to financially back you.
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.
What is a guarantor loan?
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.
Who can be a guarantor?
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.
Can be a guarantor
A relative, friend or work colleague.
Good to excellent credit rating.
UK resident.
Aged 21-75.
Holds a UK bank account.
Has a regular income (full or part-time employment or a pension).
Can afford to make the monthly payments if the borrower can’t.
Is comfortable to act as guarantor and understands the commitment they are undertaking.
Has no shared finances with the borrower.
Has a separate email address to the borrower.
Can’t be a guarantor
Husband or wife or partner of the applicant.
Has a shared financial account with the borrower (eg business bank account, mortgage or car payment plan).
Under 21.
Over 75 years old.
Non-UK resident.
Poor to fair credit rating.
Can’t afford to make repayments if the borrower defaults.
Has been made bankrupt or received an IVA or CCJ in the past six years.
Compare guarantor loans
Table: sorted by representative APR, promoted deals first
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?
Does the borrower really need the loan? Couldn’t they just save up instead?
Are you comfortable taking over the payments if something goes wrong?
Are you planning any big financial commitments during the duration of the loan? Being a guarantor could affect how much credit you are offered elsewhere.
Frequently asked questions
This is to avoid fraud and to ensure the guarantor named in the paperwork really is aware of the agreement.
It could. Although being a guarantor shouldn’t harm your credit score unless your borrower defaults and you have to take on the repayments (and even then only if you don’t make the repayments), the borrower will be recorded on your credit report as a “financial association”. Mortgage lenders may consider the potential outgoings of the guarantor loan when assessing the affordability of any application for credit, so it potentially could affect the size of mortgage you are offered.
If you act as a guarantor, this will be listed as a “financial association” on your credit report. The guarantor loan will not affect your score unless the borrower defaults and you become responsible for making the repayments. However, lenders will look at your financial associations when considering any application for credit.
No. The guarantor will remain as guarantor until the loan is paid off in full.
Yes, if the lender deems you can afford the repayments on both loans.
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Chris Lilly is Head of publishing at finder.com. He's a specialist in personal finance, from day-to-day banking to investing to borrowing, and is passionate about helping UK consumers make informed decisions about their money. In his spare time Chris likes forcing his kids to exercise more. See full bio
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A guarantor loan allows people with no or a very low credit score to borrow if they have a guarantor who agrees to cover any unpaid monthly repayments. We have compiled statistics on how people are handling their guarantor loans.
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.
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