Guarantor Loans

Guarantor loans are a type of personal loan that involve someone else supporting your application. This is usually a close friend or family member who agrees to step in and make the repayments if you are unable to.

Because the lender has this extra level of reassurance, guarantor loans are often considered by people who have poor credit or a limited borrowing history. Having a guarantor can sometimes improve your chances of being approved, but it also means another person is taking on a financial responsibility, which is important to think about carefully before you apply.

What are guarantor loans

Guarantor loans are aimed at people who may find it harder to get a loan on their own, often because they have a poor credit history or limited experience with borrowing. With this type of loan, someone close to you, such as a family member or trusted friend, agrees to support your application by stepping in to make the repayments if you are unable to.

Because this extra support reduces the risk for lenders, it can sometimes open up access to higher loan amounts or more favourable interest rates than you might qualify for on your own. However, it also means another person is taking on a financial responsibility, which is important to think about carefully before going ahead.

How guarantor loans work

When you apply for a guarantor loan, both you and your guarantor provide personal and financial details. The lender then looks at the circumstances of both of you to decide whether the loan is affordable. This includes reviewing income, regular outgoings and credit history.

If the loan is approved, the money is usually paid into your bank account, although in some cases it may go to the guarantor first. Repayments are then made in agreed instalments. If you miss a payment, the guarantor is legally responsible for covering what is owed, which is why it is essential that everyone involved fully understands the commitment from the start.

Benefits of guarantor loans

Guarantor loans can provide a way to borrow for people who may struggle to qualify for other types of credit. Having a guarantor can give lenders more confidence, which can sometimes mean access to larger loan amounts than other bad credit options. Some lenders may offer loans from around £1,000 up to £15,000, depending on affordability.

Interest rates may also be lower than those on some other loans aimed at people with poor credit, as the lender has extra reassurance. If repayments are made on time, this type of loan can also help improve your credit profile over time.

Things to consider

A guarantor loan is a serious commitment for both you and the person supporting you. If repayments are missed, your guarantor will need to step in, which could affect their finances and their credit record.

While interest rates can be more competitive than some bad credit loans, they are usually still higher than standard personal loans. It is also important to think about the personal impact. Money issues can put pressure on relationships, and financial strain or missed payments could affect even close family or friends.

Before applying, it is worth taking time to talk openly with your guarantor about what the arrangement means and what would happen if your circumstances changed. Making sure everyone is comfortable with the commitment can help avoid problems later on.

Who can be a guarantor?

A guarantor is usually someone who has a good credit history and a stable financial situation. This could be a close family member or a trusted friend who feels comfortable supporting your application.

Lenders will look for a guarantor who has a reliable income and can afford to step in if repayments are missed. Most importantly, a guarantor needs to fully understand that they are taking on legal responsibility for the loan if you are unable to repay it.

Because this is a serious commitment, it is important that anyone acting as a guarantor is confident they can manage the responsibility before agreeing to help.

Frequently Asked Questions