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Guarantor Loans

Everything you need to know about guarantor loans 

published: 23 November 2022

What is a guarantor loan?    

A guarantor loan is a type of loan you take out with someone else – usually a family member – who promises to pay your debt if you can’t. This person is referred to as the guarantor. 

Guarantor loans are an option for those who find it difficult to get a loan. The guarantor acts as a safety net for your lender. If you default, the guarantor will be responsible for making the loan repayments. Both you and your guarantor will be legally liable for the loan.  

Generally, banks and building societies in the UK won’t offer you a guarantor loan. This is because guarantor loans can be seen as ‘risky’, especially when the country’s finances aren’t in great shape. Currently, you cannot compare guarantor loans through MoneySuperMarket.  

How do guarantor loans work?

Here’s how the guarantor loan process usually goes: 

  1. Find a guarantor and apply: You’ll need an agreement from the guarantor (friend or family member). Both you and the guarantor complete the loan application and sign. 

  2. Loan agreed: The terms of the loan, including your interest rate, the term of the loan and the amount borrowed are all confirmed. 

  3. Funds paid out: Depending on the provider's terms, money is paid out to you or your guarantor. The guarantor may have to pass the funds on to you. 

  4. Repaid in instalments: Monthly repayments of the loan and interest begin immediately. If you hit difficulties the loan provider will require repayments from your guarantor. 

Who can be a guarantor? 

To be a guarantor you're likely to need to be the following: 

  • Close friend or family member  

  • Aged 21 or over*  

  • A homeowner 

  • Good credit history  

*Terms may differ between providers, such as minimum age and income requirements 

What checks will a guarantor undergo? 

Your guarantor will have to go through a guarantor check. These checks are carried out by lenders and help them decide if they will approve your guarantor for a loan. Your guarantor will undergo a credit check where their credit history and credit score will be reviewed. Lenders do this to determine if your guarantor has handled credit well in the past and is suitable to be a guarantor.  

What are the pros and cons of guarantor loans?

Guarantor loans come with a range of benefits and downsides, including: 

Advantages 

  • You may qualify even if you have a poor or limited credit history 

  • You might be able to borrow more money than with other loan types 

  • You can build your credit score by making repayments on time 

Disadvantages 

  • Interest on your loan can be higher than on standard loans 

  • Missing repayments can damage your relationship with your guarantor 

  • Guarantors can be taken to court or lose assets if they can’t pay 

How much will a guarantor loan cost me? 

Because of the nature of guarantor loans and the added risk, they can carry, the interest on your loan can be higher than on other loans. For the guarantor, the loan will cost you money if the borrower doesn’t keep up with their repayments as you will be legally required to cover them. 

If you can’t make the loan repayments, you risk losing assets such as your home. Because of what a guarantor loan could cost you financially, it is important for guarantors to carefully consider if they’re able to make the payments if their borrower can’t. 

Can I get a guarantor loan with a bad credit score? 

You should be able to get a guarantor loan with bad credit, but there are likely to be some restrictions on your borrowing: 

  • You may not be able to borrow as much 

  • You’re likely to have to pay higher interest rates 

But having a guarantor can make it easier for your loan to be accepted even if you have a low credit score.   Keeping up with your repayments on your guarantor loan can boost your credit score over time. 

What happens if my guarantor is unable to make my repayments? 

If your guarantor doesn’t make the repayments, then interest will continue to be added to the loan and it’ll be put into arrears. If you and your guarantor do not make the repayments then both of your credit scores will be negatively affected. 

If your guarantor refuses to pay then they can expect to face legal action, including being asked to come to court. If this is a secured loan, then your guarantor may lose their home. 

Is a guarantor loan right for me? 

A guarantor loan being right for you will depend on your individual circumstances: 

A guarantor loan could work for you if: 

  • Have bad or no credit history: If you don’t have a good credit score, then a guarantor loan could be the difference between you getting a loan or not. You may also have a low credit score because you have no credit history. It can be harder to borrow when you’ve never used credit before because lenders can’t judge how reliable you are with payments 

  • Over 18 and a UK resident: To apply and be accepted for most guarantor loans you’ll need to be a permanent UK resident and aged at least 18. In some cases, you may need to be 21 

  • Have a regular income: Lenders will want to see that you have a regular, stable income - specific income requirements will vary* - and that you have a UK bank account 

*Terms may differ between guarantor loan providers, such as income requirements and no recent bankruptcy, IVAs or debt management plans  

A guarantor loan could be a bad idea for you because it may: 

  • Negatively affect the relationship with your guarantor: If you fail to make payments and your guarantor has to pay them on your behalf, –they may not be happy about this. On the other hand, your guarantor could refuse to make the payments and this may strain your relationship with them. You need to carefully think about who you make your guarantor and if your relationship can withstand any financial problems 

  • Negatively impact credit scores: If both you and your guarantor are unable to make the payments then you run the risk of lowering your credit scores. You’ve probably applied for a guarantor loan because your credit score is low, so failure to keep up with your guarantor loan can further plunge your credit score downwards. Your guarantor’s credit score will also lower if they don’t keep up with the payments 

  • Have high-interest rates: Interest rates for guarantor loans will be higher than standard loans. This is a more expensive form of borrowing and you’re not guaranteed the advertised APR (annual percentage rate) 

Other useful guides  

At MoneySuperMarket, we have a range of guides for you to learn more about loans: 

Unsecured Loans vs Secured Loans 

Guaranteed acceptance loans guide 

What are the different types of loans 

Compare Loans with MoneySuperMarket 

Although at MoneySuperMarket, you can’t currently compare guarantor loans with us – we have a range of other loans to choose from.  

All you need to do is give us some information about loans and the type of loan you're on the lookout for. We’ll search through our panel of providers and find a loan suited to your needs. 

One of the good things about searching for a loan with us is that we carry out ‘soft search’. So, when you look for loans with us, it won’t affect your credit score and you’ll also find out your chances of acceptance. 

MoneySuperMarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead, we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.  






















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