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Information written by Connor Campbell Last updated on 31 March 2022.

What is a guarantor loan?

A guarantor loan is a form of loan where the borrower is backed by a guarantor. This means that if the named borrower misses a loan repayment, it must be paid by the guarantor.

It potentially allows you to secure a loan if you have a bad credit score, or if you haven’t been able to build up a credit profile.

What is a guarantor?

A guarantor is someone, usually a family member or trusted friend, who is willing to financially vouch for you and ‘guarantees’ to pay off the debt if you are unable to.

What can you use a guarantor loan for?

Guarantor loans are defined by the need for a guarantor, rather than the use of the loan itself.

This means they can be used for a variety of different purposes, from short-term emergencies to bigger expenses, depending on your personal circumstances.

How do guarantor loans differ from other loans?

The one major difference between guarantor loans and other forms of loans is the need for a guarantor.

To put it simply, to apply for a regular personal loan, you only need one person; for a guarantor loan, you need two.

You should also note that interest rates on guarantor loans are usually higher than those attached to other personal loans but rates will be lower than on other types of bad credit loans.

How does a guarantor loan work?

Guarantor loans work just like any other loan – you borrow a certain amount of money from a lender, then pay it back in instalments, with interest.

However, because these loans are available to people with bad credit, no credit, or those on a low salary, both you and your guarantor will need to sign up for a guarantor loan.

When you apply for a guarantor loan, it is a legally binding contract that the debt will be paid, if not by the borrower than by the guarantor. This means that your guarantor will need to prove they can afford to pay back the loan in order for your application to be successful.

This is also why it is so important to think carefully before asking someone to be a guarantor, as well as when agreeing to be a guarantor.

Depending on the terms of the contract, this may even mean that the loan is paid first to the guarantor, rather than you the borrower.

Can I get a guarantor loan?

Although most of the criteria for getting a guarantor loan is linked to the guarantor themselves, there are certain requirements for the borrower. For example:

  • You must be over 18 or 21, depending on the lender.
  • You must be a permanent UK resident at the time of application.
  • You need a UK bank account, direct debit capability and a debit card.
  • You need to be solvent, i.e. not bankrupt or in an IVA (individual voluntary arrangement) or debt management plan.

In some instances, but not always, you as the borrower will need to be a homeowner to access certain guarantor loans.

» COMPARE: Homeowner guarantor loans

Who can be a guarantor for a loan?

The rules for who can be a guarantor are stricter than for the borrower of the loan, and vary slightly from lender to lender. Your guarantor:

  • Must be over 18-years-old. However, some lenders will require them to be over 21 or 23, and several have an upper age limit of 75 – that is the maximum age a guarantor can be at the date the loan term ends.
  • Must have a good credit history.
  • Must be a permanent UK resident.
  • Must be able, and willing, to make loan repayments if you cannot.

Some lenders will also require the guarantor to be a homeowner. But non-homeowner guarantor loans are available, where your guarantor can be a tenant.

Due to the criteria and responsibility involved, it is important to pick your guarantor carefully, and discuss the details of the loan with them in full.

» MORE: What to consider before becoming a loan guarantor

What are the benefits of a guarantor loan?

If you have a trusted, eligible guarantor in your life, then depending on your situation a guarantor loan comes with a number of benefits. These include:

  • Access to a loan regardless of whether you have bad credit, no credit, or a low income, providing you meet the lender’s affordability checks. This includes if you have been previously rejected by other lenders.
  • Lower interest rates than on other bad credit loans and payday loans.
  • The chance to improve your credit score if you keep on top of your repayments and show you are a trusted borrower.
  • The ability to pay the loan off at any time. Some lenders will charge a fee for paying off the full debt early.

What are the risks of a guarantor loan?

It is important to carefully consider your options before getting a guarantor loan for the following reasons:

  • While interest rates can be lower than for other products for those with bad credit, they are higher than for other types of personal loans.
  • If you are unable to repay the loan, your guarantor will have to, even if their own financial circumstances change.
  • If you are unable to make the repayments, and your guarantor cannot either, it will affect the borrower and guarantor’s credit score.
  • If you default on the loan, it could put a strain on your relationship with your guarantor.

How much can I borrow with a guarantor?

You can typically borrow between £1,000 and £10,000 with a guarantor loan.

However, some lenders may allow you to borrow as little as £500, while others may allow you to borrow more than £10,000.

How much you can actually borrow will be down to the financial strength of your chosen guarantor, and your ability to afford the repayments.

How to apply for a guarantor loan

When applying for a guarantor loan, you need to make sure that you have a UK address and bank account.

You don’t actually need to have a guarantor when you first apply for a guarantor loan. However, arranging one beforehand will speed up the process. Some lenders will also allow you to initially submit multiple potential guarantors.

The application process will involve you selecting the loan amount and term, submitting your personal details, and naming your chosen guarantor.

Both you and your guarantor will be subject to affordability checks, including details of regular income, and all outgoings, such as rent or mortgage payments, bills and living costs. These checks may be conducted over the phone.

You will also both be subject to a credit check. For the borrower, this is to confirm they are not bankrupt or insolvent – a bad credit score won’t impact your ability to borrow.

For the guarantor, this is to confirm they have a good credit history. This check will not leave a mark on their credit report, nor will it affect their credit score.

Although this sounds like a lot of steps, guarantor loans can sometimes be approved within an hour of the application, often with a payout on the same day.

How can I find the best guarantor loan for me?

You can use our guarantor loan comparison table to find the loan best suited to your needs.

  • You should pay attention to:
  • the representative APR of the loan
  • the minimum and maximum terms of the loan
  • the minimum and maximum amounts of the loan
  • whether the borrower and/or the guarantor must be a homeowner

How does the guarantor loan affect the guarantor?

If the borrower makes every payment, and pays off the loan in full, then there is no impact on the guarantor.

However, if the borrower can’t make a payment, or can’t pay off the loan in full, then it becomes the legal responsibility of the guarantor.

If the guarantor then can’t make those payments, it may well negatively affect their credit score. The debt could also be passed on to a debt collection agency, and may lead to legal action against the guarantor. It is also important to be aware of the potential strain any financial difficulties could cause between you and your guarantor if you cannot repay the loan.

How much does a guarantor loan cost?

How much a guarantor loan costs will depend on the interest rates of the lender in question, and the term of the loan itself.

Always look at the APR (Annual Percentage Rate), as that will indicate how much you will have to pay in interest.

Our comparison page also has representative APRs for each lender, to give you a better idea of how much your guarantor loan might cost.

» MORE: Loans and APR - what you need to know

Can you get a guarantor loan with a low APR?

Due to the risk associated with guarantor loans from the perspective of the lender, the APR will be higher than for other unsecured personal loans. However, there are ways to reduce the APR on your guarantor loan, namely if your guarantor is a homeowner.

What happens if I get turned down?

Firstly, try to see whether the lender has offered an explanation for why you were turned down.

Often, it will be due to your guarantor failing to meet the lender’s eligibility checks.

If this is the case, you can try to find a more suitable guarantor – ideally one that is a homeowner – and once again apply for a guarantor loan.

Alternatively, you may also want to consider applying for a smaller loan, and/or with a shorter term.

Alternatives to guarantor loans

There are a number of alternatives to a standard guarantor loan.

If your guarantor is a homeowner, you may want to consider applying specifically for a homeowner guarantor loan, as you might be able to borrow a larger amount at a lower rate.

» COMPARE: Homeowner guarantor loans

If you can’t find an appropriate guarantor, then you could look into a bad credit loan that doesn’t require a guarantor.

» COMPARE: No guarantor bad credit loans

There are other bad credit loans available, including secured bad credit loans where you can use your property as a security against the loan.

» COMPARE: Secured bad credit loans

Guarantor loan FAQs

Does having a guarantor help get a loan?

Yes, having a guarantor means you may be able to get a guarantor loan, which are open to people with bad credit, no credit, or low income.

How long does a guarantor loan last for?

How long a guarantor loan lasts for will vary from lender to lender, and will depend on the term you select.

However, they tend to range between one and five years.

Can I get a loan for bad credit with no guarantor?

Yes, it's possible to get a loan for bad credit with no guarantor – however, it will have higher interest rates than a guarantor loan.

Use our comparison page to find bad credit loans with no guarantor.

» COMPARE: No guarantor bad credit loans

Do I need to get a credit check when applying for a guarantor loan?

Yes, when applying for a guarantor loan, both the borrower and guarantor are subject to a credit check. However, this will not affect your credit score.

And, if you are the borrower, it doesn’t matter if you have a poor credit score, or no credit history at all, as long as your guarantor has a clean credit history.

Can I list my spouse/partner as a guarantor?

Yes, technically your spouse or partner can act as your guarantor.

However, your guarantor cannot be linked to you financially. This means if you have a joint account with your spouse or partner, they would be unable to act as your guarantor.

If you are not linked financially, and your spouse/partner meets the other criteria, then they may be able to act as your guarantor.

Can a guarantor be removed from a loan?

It is very hard for a guarantor to be removed from a loan once agreed. So you should be 100% sure you are comfortable with being a guarantor, and resist pressure to become a guarantor if you have any doubts.

There will typically be a 14-day, cooling-off period once the loan agreement has been signed, where the borrower can cancel the loan. So if you are having doubts as a guarantor, then discuss this option with the borrower.

If you can find a suitable replacement guarantor, it may be possible to remove the initial guarantor. This decision will be up to your lender.

Can a retired person be a loan guarantor?

Yes, a guarantor can be retired, so long as they have regular income in the form of a pension or benefits, and still meet all of the lender’s other affordability criteria — though lenders often have an upper age limit of 75 when the loan term ends.

Can you be a guarantor for two loans?

No, in most cases a guarantor can only back one loan at a time. This is important to consider if you think there are people in your life who may need this assistance in the future.

Some lenders may still approve a guarantor loan even if the guarantor is listed on another loan.

Can you apply for an IVA with a guarantor loan?

Yes, a guarantor loan can be included in an IVA (Individual Voluntary Agreement). This will legally protect you, the borrower, from the loan company. Your guarantor will not be protected in the same way.

However, the guarantor loan provider may vote to block your IVA. You might then need to discuss the debt with your guarantor, and if they can take responsibility for the remaining payments of the guarantor loan.

As the guarantor, you can also include the guarantor loan in your own IVA. In this instance, the original borrower wouldn’t be protected in the same way.

» MORE: What happens if I can’t make my loan repayments?

Can I pay off my loan early?

Yes, you can pay your guarantor loan off early. You may or may not be required to pay an Early Repayment Charge, depending on your lender.

What if I can’t make my repayments?

If you as the borrower cannot make your repayments, then it is the responsibility of your guarantor to make those repayments on your behalf.

You should not agree to be a guarantor if you think that you will be unable to make repayments if asked at some point in the future.

What should I consider if I’m thinking about becoming a guarantor?

Becoming a guarantor is not something to be done lightly. You should make sure you fully consider whether:

  • You can afford to repay the debt in full, even if your own personal finances change in the future.
  • The borrower is in a financial position to repay the loan they have requested over the specified period.
  • The borrower is responsible and can be trusted to make repayments on time.
  • The borrower definitely needs the loan.
  • You are willing to add a financial element to your relationship with the borrower.

Does my guarantor have to be a homeowner?

The answer depends on your lender – some will require your guarantor to be a homeowner, others will not.

When choosing your guarantor, you should be aware that if they are a homeowner you may be able to get a larger loan with a lower interest rate.

Are there guarantor options for a car?

Yes, there are specific guarantor options for car finance. Here, the guarantor will ‘guarantee’ they will pay the car finance repayments if the borrower cannot.

Like with a guarantor loan, it means you may still be able to get car finance even if you have bad credit, no credit or a low income.

» MORE: What is guarantor car finance?

How do I improve my credit score?

Credit scores can sometimes feel like something you have little control over, a mystery force dictating your finances.

However, it is important to remember that they are not set in stone and there are simple steps you can take to improve your credit score. These include:

  • registering to vote
  • checking your credit report for mistakes
  • setting up direct debits
  • stop frequently applying for credit in a short window

Longer-term options for improving your credit include using credit (but not nearing the credit limit) and paying your bills on time.

» MORE: How to improve your credit score

About the author:

Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more

*Eligibility Service:

The loans eligibility service is fully provided by Monevo.  The data you supply is directly submitted to Monevo and is used to retrieve loan quotes from their panel of lenders.  By using their loans eligibility service you are agreeing to Monevo’s terms and conditions and privacy policy which can be found at Monevo.co.uk

**Guarantor Loan:

A guarantor loan is where the borrower is backed by a guarantor. This means that if the named borrower misses a loan repayment, it must be paid by the guarantor.

Current market choice for guarantor lenders is low. The eligibility service will also provide results for other types of loans. Ensure you carefully review your results and fully understand the terms and conditions of any loan before proceeding.

For free debt advice, contact Step Change, Citizens Advice or National Debt Line.

Monevo.co.uk is a registered Trading Name of Monevo Limited which is an Appointed Representative of Quint Group Limited, and is entered on the Financial Services Register under reference number: 723672.  Quint Group Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register under reference number: 669450.  Monevo Limited is registered in England and Wales (Company number 06511345). Registered office: Glasshouse, Alderley Park, Nether Alderley, Cheshire,SK10 4ZE.  Licensed by the Information Commissioners Office, (Registration number Z1498441).

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