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.<\/p>
A guarantor loan<\/a> 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.<\/p> If your credit score is all that\u2019s standing between you and a perfectly affordable loan, applying with a guarantor can help get your application across the line.<\/p> It\u2019s crucial to understand that being a guarantor does not mean \u201cvouching for\u201d the applicant or simply providing a reference \u2013 the guarantor is actually volunteering to pay off the loan if the applicant does not.<\/p> Asking someone to be your guarantor is a big decision for both the borrower and the guarantor. As an applicant, you\u2019re asking the guarantor to risk their financial situation to help you secure credit.<\/p> 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\u2019re 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.<\/p> 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\u2019t have to use their own money to pay off the borrower\u2019s debt. However, the guarantor will need to have the finances available should the borrower run into problems with their repayments.<\/p> When looking for a guarantor, it\u2019s a good idea to have at least two people in mind. It\u2019s more often the guarantor\u2019s circumstances (not the borrower\u2019s) that lead to an application being declined.<\/p> Applying for a guarantor loan is a big commitment for both parties, which could impact their credit reports and financial situations.<\/p> Guarantor criteria can vary from lender to lender, but will typically include the following requirements.<\/p>Who can be a guarantor on a personal loan?<\/h3>
Can be a guarantor<\/h4>
Can\u2019t be a guarantor<\/h4>
Compare guarantor loans<\/h3>