Guarantor Loans
Guarantor loans are a type of personal loan that requires a third party, typically a family member or close friend, to co-sign the loan agreement. The guarantor agrees to take responsibility for repayments if the borrower cannot pay. These loans are often used by individuals with poor or limited credit histories who may struggle to access traditional credit.
What Are Guarantor Loans?
Guarantor loans provide a borrowing option for individuals who do not qualify for conventional loans due to a low credit score or insufficient financial history. The presence of a guarantor reduces the risk to the lender, often resulting in larger loan amounts or better interest rates than the borrower might obtain on their own.
How Do Guarantor Loans Work?
- Application: Borrowers and guarantors submit personal and financial details to the lender.
- Assessment: Lenders evaluate both the borrower’s and guarantor’s financial circumstances and creditworthiness.
- Approval: Once approved, the loan amount is transferred to the borrower or, in some cases, the guarantor.
- Repayment: The borrower repays the loan in instalments. If they miss payments, the guarantor becomes responsible for repayment.
Benefits of Guarantor Loans
Accessibility
These loans are available to individuals with poor credit, as the guarantor’s creditworthiness supports the application.
Larger Loan Amounts
Borrowers can access higher amounts, typically ranging from £1,000 to £15,000, depending on the lender and guarantor’s financial standing.
Potentially Lower Interest Rates
Having a guarantor may result in lower interest rates compared to other bad credit loan options.
Opportunity to Rebuild Credit
Making timely repayments can improve the borrower’s credit score over time.
Things to Consider
Guarantor Responsibility
The guarantor is legally obligated to repay the loan if the borrower cannot, which can affect their finances and credit score.
Higher Interest Rates
Interest rates for guarantor loans may still be higher than traditional personal loans, especially for borrowers with poor credit.
Strain on Relationships
Missed payments can put financial and emotional strain on the relationship between the borrower and guarantor.

Who Can Be a Guarantor?
A guarantor is typically someone with:
- A good credit history
- Stable income and finances
- A willingness to take responsibility for the loan if the borrower cannot repay
Frequently Asked Questions
Yes, guarantor loans are specifically designed for individuals with poor or limited credit histories.
A guarantor is often a family member, close friend, or trusted colleague with a good credit history.
The guarantor becomes responsible for repaying the loan, and their credit score may be impacted if they fail to pay.
Yes, guarantor loan providers must be authorised by the Financial Conduct Authority (FCA), ensuring fair and transparent lending practices.