Both a joint loan and a guarantor loan involve a second person. But the two arrangements work quite differently, and the difference matters, especially for credit files and who is responsible if something goes wrong.
This article explains how each type works, what the liability looks like, and which situation each option tends to suit.
This article is information only. It does not constitute financial advice and does not account for your personal circumstances. If you are unsure which option suits your situation, speaking to an FCA-regulated financial adviser or a free debt charity may help.
What is the main difference between a joint loan and a guarantor loan?
With a joint loan, two people borrow together. Both are named on the agreement, both receive the money (or share access to it), and both are equally responsible for every repayment from day one.
With a guarantor loan, one person is the borrower and a second person, the guarantor, agrees to cover repayments only if the borrower fails to make them. The guarantor is a backstop, not a co-borrower.
In plain English: a joint loan makes two people borrowers. A guarantor loan makes one person a borrower and a second person a safety net.
How do the two options compare?
The table below sets out the key differences side by side.
| Feature | Joint loan | Guarantor loan |
|---|---|---|
| Who borrows the money | Both applicants equally | The main borrower only |
| Who is responsible for repayments | Both, from the start | The main borrower first; the guarantor only if the borrower defaults |
| Whose credit file is checked at application | Both applicants | Usually both (main borrower and guarantor) |
| Whose credit file shows the account | Both applicants | Usually the main borrower's; may also show on the guarantor's |
| Financial association created | Yes, between both borrowers | Sometimes, depending on lender |
| Who the money benefits | Typically both people | The main borrower |
| Suitable when | Both people need the funds | One person needs the funds; the other is providing support |
Liability: what "jointly and severally liable" means
On a joint loan, both borrowers are jointly and severally liable. This is a legal term that means the lender can pursue either person for the full amount owed, not just their half.
For example, if two people take out a joint loan for £5,000 and one stops paying, the lender can ask the other to cover the entire outstanding balance, not just £2,500.
The important bit is that this applies regardless of any private agreement between the two borrowers. What matters to the lender is the contract they both signed.
A guarantor's liability is different. It is triggered only if the main borrower misses payments. Until that point, the guarantor has no payment obligation.
How does each option affect credit files?
This is often the area people think about least, and it can matter well beyond the life of the loan.
Joint loans and financial association
When you take out a joint loan, a financial association is created between you and the other borrower. Credit reference agencies record this link.
Once that association exists, lenders assessing your future applications may look at the other person's credit history too. If the other borrower has a weak credit history, this can affect your own applications for credit, even for products that have nothing to do with the original joint loan.
The association remains on your file until you ask the credit reference agency to remove it (called a notice of disassociation), which is typically only possible once all joint accounts are closed.
Guarantor loans and credit file impact
A guarantor loan usually shows on the main borrower's credit file as a standard credit account.
For the guarantor, the picture is less uniform. Many lenders run a hard credit search on the guarantor at application stage. That search will show on the guarantor's credit file and can influence their own credit applications for a short period.
Whether the loan account itself appears as a liability on the guarantor's credit file depends on the lender. Some report the account; others do not. Checking this with the lender before agreeing to be a guarantor is a sensible step.
A useful first step for anyone considering either role is to check their own credit file first, through Experian, Equifax, or TransUnion, so they understand their current position.
Which situation suits each option?
When a joint loan may be worth considering
- Both people genuinely need and will use the borrowed funds (for example, a shared home improvement).
- Both people have credit histories strong enough to support a joint application.
- Both people are comfortable being equally responsible for every payment.
- The relationship is stable and long-term, since removing someone from a joint loan later is not straightforward.
When a guarantor loan may be worth considering
- One person needs to borrow but has a limited or poor credit history.
- A family member or close friend wants to help them access credit without becoming a co-borrower.
- The supporting person understands and accepts that they may be asked to cover repayments if the borrower cannot.
- The guarantor has a strong enough financial position to cover repayments if needed.
What to consider before asking someone to be a guarantor
Being a guarantor is a significant commitment. The guarantor takes on real financial risk. Before asking someone to act as guarantor, it is worth making sure they understand exactly what they are agreeing to.
The FCA requires that lenders make the terms of the guarantee clear. MoneyHelper has plain-English guidance on what guarantors are taking on, which can be a useful thing to read together before anyone signs.
Frequently asked questions
Does a guarantor loan appear on the guarantor's credit file?
It depends on the lender. Many lenders run a hard credit search on the guarantor at application, which does show on their file. The loan itself may also appear as a liability on the guarantor's file, though practices vary. It is worth asking the lender directly before anyone agrees to be a guarantor.
Are both people equally liable on a joint loan?
Yes. Both borrowers are jointly and severally liable. That means the lender can pursue either person for the full amount if repayments are missed. It does not matter who made the spending decisions; both names are on the agreement.
Can a joint loan affect the credit score of both applicants?
Yes. A joint loan creates a financial association between the two people. That association can influence how lenders view each person's creditworthiness in future, even after the loan is repaid. Both applicants' credit files will show the account.
What happens if the main borrower on a guarantor loan stops paying?
The lender will contact the guarantor and ask them to cover the missed payments. If the guarantor cannot or does not pay, the lender can take action against them, which could affect the guarantor's credit file and financial position.
Which option is better if only one person needs the money?
If only one person needs the money, a guarantor loan is often the more straightforward arrangement, because the second person is a backstop rather than a co-borrower. A joint loan makes both people borrowers of record, which may not suit the situation.
Can you remove someone from a joint loan?
Removing a person from a joint loan is not straightforward. It usually requires the lender's agreement, and may involve refinancing the loan in one name only. The lender will want to confirm that the remaining borrower can manage the debt alone.
Sources and further reading
For more detail on how guarantor loans work in the UK, the Guarantor loans guide covers the full picture, including how lenders assess applications and what guarantors agree to.
MoneyHelper (the public money guidance service) provides guidance on guarantor loans and what the commitment means for both parties: moneyhelper.org.uk.
The FCA sets the rules for how consumer credit, including guarantor loans, must be offered in the UK: fca.org.uk/consumers.
- Does a guarantor loan appear on the guarantor's credit file?
It depends on the lender. Many lenders run a hard credit search on the guarantor at application, which does show on their file. The loan itself may also appear as a liability on the guarantor's file, though practices vary. It is worth asking the lender directly before anyone agrees to be a guarantor.
- Are both people equally liable on a joint loan?
Yes. Both borrowers are jointly and severally liable. That means the lender can pursue either person for the full amount if repayments are missed. It does not matter who made the spending decisions; both names are on the agreement.
- Can a joint loan affect the credit score of both applicants?
Yes. A joint loan creates a financial association between the two people. That association can influence how lenders view each person's creditworthiness in future, even after the loan is repaid. Both applicants' credit files will show the account.
- What happens if the main borrower on a guarantor loan stops paying?
The lender will contact the guarantor and ask them to cover the missed payments. If the guarantor cannot or does not pay, the lender can take action against them, which could affect the guarantor's credit file and financial position.
- Which option is better if only one person needs the money?
If only one person needs the money, a guarantor loan is often the more straightforward arrangement, because the second person is a backstop rather than a co-borrower. A joint loan makes both people borrowers of record, which may not suit the situation.
- Can you remove someone from a joint loan?
Removing a person from a joint loan is not straightforward. It usually requires the lender's agreement, and may involve refinancing the loan in one name only. The lender will want to confirm that the remaining borrower can manage the debt alone.