A guarantor can become responsible for the debt if the borrower misses repayments. This can affect the guarantor’s finances, credit file, and relationship with the borrower. Both borrower and guarantor should fully understand the risks before any application is made.
If you are considering a guarantor loan because you cannot access mainstream credit, it is worth speaking to a free debt advice service first — they can help you understand all available options:
- StepChange — 0800 138 1111 — stepchange.org
- National Debtline — 0808 808 4000 — nationaldebtline.org
- MoneyHelper — 0800 138 7777 — moneyhelper.org.uk
What is a guarantor loan?
A guarantor loan is a loan where a third party — the guarantor — agrees to cover repayments if the borrower cannot meet them. The guarantor takes on legal responsibility for the debt in that event.
This type of unsecured loan is sometimes used by people with limited credit history or a low credit score, as some lenders place greater weight on the guarantor’s financial standing than the borrower’s.
Who can be a guarantor?
Lender requirements vary, but common criteria include:
- Being over a certain age (typically 21 or over)
- Being a homeowner (required by some, not all, lenders)
- Not being financially linked to the borrower (some lenders exclude partners or spouses)
- Having a strong credit record
Even if someone meets the eligibility criteria, both borrower and guarantor should understand the financial and relationship risks before any application is made. A potential guarantor should consider what would happen to their finances if the borrower could not repay.
Is a guarantor loan right for you?
Guarantor loans typically carry high APR rates — it is not uncommon for rates to be in the range of 30% to 60% APR, and sometimes higher. Lenders are only required to offer the advertised representative APR to 51% of applicants, so the rate you are offered may be higher.
A guarantor may improve the chance of acceptance with some lenders, but it also places significant financial and personal responsibility on the guarantor. A guarantor loan should not be the first option considered, and cheaper alternatives should be explored first.
Example: a guarantor loan of £12,000 over 3 years at 20.9% APR would result in a total repayable amount of approximately £15,864 — meaning the loan costs approximately £3,864 in interest.
The risks for the borrower
- If repayments are missed, your credit score will be affected
- Multiple loan applications in a short period can damage your credit score further — use soft searches or eligibility checkers where available before applying
- If you default, the guarantor will be pursued for the debt
The risks for the guarantor
- The guarantor is equally liable for the full debt if the borrower defaults
- The guarantor is typically contacted within 48 hours of a missed payment
- The guarantor’s own credit score may be affected if they are unable to meet the missed payments
- This can place significant financial and personal pressure on the relationship between borrower and guarantor
What to understand before applying
When comparing guarantor loan offers:
- Compare the total amount repayable, not just the monthly payment
- Check the APR carefully and understand it may differ from the advertised rate
- Read the terms for what happens if a payment is missed — including how quickly the guarantor is contacted
- Check whether the lender is FCA-authorised at register.fca.org.uk
- Be aware of any application fees or early repayment charges
Alternatives to consider first
Before applying for a guarantor loan, consider whether any of these alternatives are available:
- Credit union — many credit unions offer small loans at lower rates and with more flexible criteria than specialist lenders
- MoneyHelper — 0800 138 7777 — can help you understand all available options
- Overdraft — for small, short-term shortfalls only; check fees and interest carefully
- Employer salary advance — some employers offer interest-free advances
- Local authority or charity support — some councils and local charities provide emergency grants or no-interest loans
Free help
If you are struggling with debt or finding it difficult to access credit:
- StepChange — 0800 138 1111 — stepchange.org
- National Debtline — 0808 808 4000 — nationaldebtline.org
- MoneyHelper — 0800 138 7777 — moneyhelper.org.uk
- Citizens Advice — citizensadvice.org.uk
Related guides: Bad Credit Loans · Personal Loans · Debt Consolidation