Compare guarantor loans for 2024

If your credit record isn't perfect, you could get a better interest rate by applying with a friend or relative with good credit.

Avatar

By

Chris Lilly

Updated

Fact checked

What does guaranteeing a loan mean for the borrower and the guarantor? This guide will take you through the ins and outs of guarantor personal loans, the benefits available to borrowers and how to avoid some common pitfalls.

Compare guarantor loans

Table: sorted by representative APR, promoted deals first
1 - 1 of 1
Name Product Ratings Customer rating Finder score Total Payable Monthly Repayment Representative APR Link
1plus1 Loans Guarantor Loan
1plus1 Loans Guarantor Loan
Finder score
★★★★★
Not yet rated
★★★★★
Expert analysis
Check eligibility
View details
Representative example: Borrow £10,000.00 over 3 years at a rate of 47.8% p.a. (fixed). Representative APR 47.8% and total payable £17,259.12 in monthly repayments of £479.42.
loading
1 - 1 of 1
Name Product Ratings Customer rating Finder score Total Payable Monthly Repayment Representative APR Link
Norwich Trust Limited Unsecured Homeowner Loan
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.
loading

Please 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.

What does it mean to guarantee a loan?

Lenders use a number of factors (such as your credit score, the amount of time you have worked for your current employer, etc.) to help determine which applicants would present the least risk. If you don’t meet one of these requirements, you might not 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 a 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 a mortgage they could get might be affected by the guarantor loan, since they could find themselves responsible for that debt at any time.

What should I look for in a guarantor loan?

When it comes to comparing guarantor loans, there are some key features to look for. Look at each loan’s features and costs before deciding which one suits your needs.

  • Total payable. How much of the loan amount, plus fees and interest, you will be expected to pay.
  • Interest rate. Most guarantor loans charge a fixed rate of interest, meaning your monthly repayments will stay the same throughout the loan. Remember that the advertised rate isn’t necessarily the rate the lender will offer you.
  • Fees. Are there any application/set-up/product, late payment, early repayment or overpayment fees?
  • Loan terms and amounts. Aim for a shorter term that gives you monthly repayments you can afford. The longer the loan period, the more money you are likely to pay.
  • Eligibility criteria. Does the borrower and guarantor both meet their individual criteria?
  • Early repayment. There might not be any fees for repaying your loan early, but many lenders charge an additional 2 months’ interest on any sums repaid ahead of time.

Homeowner or non-homeowner guarantor loans

Some lenders divide their loans into 2 categories – either for homeowner guarantors or non-homeowner guarantors. The term “non-homeowner” refers to the residential status of the guarantor, not the applicant (borrower).

Non-homeowner or tenant guarantor loans usually have a higher interest rate than homeowner guarantor loans, because of the perceived increased risk to the lender and the complication of involving a guarantor.

Homeowner guarantor loans
Non-homeowner guarantor loans

Application process

These are the typical steps that an application for a guarantor loan will go through:

1
Applicant applies
Fill in details and sign agreement.
2
Guarantor fills in details
Your guarantor adds their info.
3
Credit & affordability checks
Both applicant and guarantor are checked by the lender.
4
Guarantor signs agreement
Once they're happy with the loan offer.
5
Lender contacts both parties
All parties may need to speak over the phone.
6
Loan is offered/Offer is accepted
Once lender is satisfied with both parties.
7
Funds transferred
Applicant accepts and signs the offer.

Who can be my guarantor?

Criteria will vary from lender to lender, but as a minimum, you should expect that the guarantor must meet the following criteria:

  • Age 21-75.
  • Not be your spouse or partner.
  • Have a strong credit record.
  • Have an income (employed, self-employed or a pension).
  • UK resident and hold a UK bank account.
  • Have completely separate finances to your own.
  • Give their full consent to act as a guarantor and understand the commitment they are undertaking.

Not every personal loan is a “guarantor” personal loan. Using a guarantor is a feature offered by some specialist lenders, including those listed above.

Thinking of being a guarantor?

  • I am satisfied that the borrower can manage the loan repayments. This is up to you to ensure and may involve you seeking independent financial advice.
  • I have checked the terms of the loan agreement. This includes checking whether you can expect to be notified if the borrower defaults on the loan and the extent of your liability.
  • I understand the lender doesn’t have to proceed with enforcement against the borrower before taking legal action against me as a guarantor. You have no right to insist on this as a guarantor.
  • I understand that I could end up paying more than the original amount borrowed. Unlike some forms of borrowing, interest on guarantor personal loans isn’t capped by the Financial Conduct Authority (FCA).

What documents do you need to open a personal loan?

What’s the difference between a guarantor and a co-borrower?

If you’re a co-borrower, you are listed on the loan as a borrower and are jointly liable for the debt. If you are a guarantor, you only become responsible for the debt when the borrower defaults on the loan.

What is APR?

When you’re comparing guarantor loans, it won’t be long before you’ll come across the Annual Percentage Rate (APR). This figure is designed to provide an annual summary of the cost of a loan, taking into account both interest and any unavoidable fees (for example, an arrangement fee) over the duration of a loan.

All lenders must calculate the APR of their products in the same way, and must tell you the APR before you sign an agreement. So, for consumers, it can be a handy tool for comparison.

There’s a big catch, however. Almost all lenders tailor their interest rates to the individual applicant – so where they think there’s a greater chance of not getting their money back, they’ll offer a higher interest rate. The representative APR is the APR that the lender realistically expects at least 51% of its borrowers to receive.

Many guarantor lenders have chosen to split out the loans they offer into loans where the guarantor is a homeowner and loans where the guarantor isn’t a homeowner. As such, you’ll sometimes see 2 different representative APRs for the same loan company, for example, UK Credit and TrustTwo.

Bottom line

Whilst guarantor loans may enable you the ability to borrow if you’re struggling to get a personal loan, you should only apply for one if you’re certain you or your guarantor will be able to meet the repayments.

If you’re applying to act as a guarantor, the decision shouldn’t be taken lightly. Should the guarantee be unable to make repayments, you would then be liable until the loan, plus any interest, is paid off. You should look into it thoroughly before deciding.

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.

More guides on Finder

Go to site