Guarantor Loans

Guarantor loans are personal loans that involve a second person, usually a trusted friend or family member, who agrees to support the application. This person, known as the guarantor, promises to make the repayments if the borrower can’t. These types of loans are often considered by people with poor credit or limited borrowing history, as having a guarantor can help improve the chances of approval with some lenders.

What Are Guarantor Loans?

Guarantor loans are designed for people who might find it difficult to get a loan on their own, often because of a poor credit history or limited borrowing experience. With this type of loan, someone close to the borrower, like a family member or trusted friend, agrees to step in and make the repayments if the borrower can’t. Because this extra level of security reduces the risk for lenders, it can sometimes mean access to higher loan amounts or better interest rates than the borrower would qualify for alone.

How Do Guarantor Loans Work?

Both the borrower and guarantor provide their personal and financial information during the application. The lender assesses the financial situation and credit history of both parties to decide if the loan is affordable. If the loan is approved, the money is usually paid into the borrower’s account, although in some cases it may go to the guarantor first. Repayments are made in agreed instalments, but if the borrower misses a payment, the guarantor is legally responsible for covering the cost.

Benefits of Guarantor Loans

These loans can offer a route to borrowing for people who may not qualify elsewhere, thanks to the support of the guarantor. They also tend to offer larger loan amounts than other poor credit options — some lenders provide between £1,000 and £15,000, depending on affordability. Interest rates may also be lower than other bad credit loans, since the lender has extra reassurance. And if the borrower keeps up with repayments, it can help improve their credit score over time.

Things to Consider

Guarantor loans involve a big commitment. If the borrower misses payments, the guarantor must step in, which can affect their own credit record and finances. While interest rates may be better than some alternatives, they’re usually higher than standard personal loans. It’s also important to consider the personal impact, missed payments or financial strain could affect 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