Guarantor Loans - Borrow £50 to £5,000^†

A guarantor loan is a type of unsecured loan that requires a friend or family member with a solid credit history to co-sign the credit agreement between the borrower and lender. Loans with guarantors exist to help people borrow money when they don’t have a proven track record of successfully borrowing money.

A guide to guarantor loans

If you’ve been unable to secure a personal loan in the past, or you’ve got poor credit history, a guarantor loan could be the financial solution for you. These instant guarantor loans are ideal if you’re looking for a small or large amount of finance to cover emergencies.

A guarantor loan helps you get your hands on the cash you need when you’ve exhausted all your other options. Pay for home renovations, consolidate your debt or pay for unexpected or emergency repairs.

Guarantor loans are a popular form of finance, with the average amount for this type of personal loan coming out at £4,894. To give you a little insight into just how popular they are, in . So, if you’re researching whether or not a guarantor loan is right for you, you’re not alone!

We’re here to answer many frequently asked questions about UK guarantor loans, so let’s jump straight to it.

• What is a guarantor loan?
• How do guarantor loans work?
• What does it mean to be a guarantor?
• Who can become a guarantor?
• Should I become a guarantor?
• How much does a guarantor loan cost?
• Things to consider before taking out a guarantor loan
• Can I get a guarantor loan via a direct lender?
• I have bad credit, can I still apply for a guarantor loan?
• How do I apply for a guarantor loan?
• The pros and cons of guarantor loans
• What can I use my guarantor loan for?
• Why compare guarantor loans?
• What are the best guarantor loans?
• Guarantor loans FAQs
• Where do I go for help if I’m in financial difficulty?

What is a guarantor loan?

A guarantor loan is a personal loan that requires a second person, referred to as the ‘guarantor’, to co-sign your loan agreement and agree to pay back the borrowed money if you are unable to meet repayments.

This type of loan setup gives the lender assurance that the loan will be repaid, and that they won’t lose their investment by lending money to you.

How do guarantor loans work?

Guarantor loans work much like any other loan, you borrow an amount of money and pay it back over a period of time, referred to as the ‘loan term’. The only difference being that you require a friend or family member to guarantee the loan.

After both you and your guarantor have signed the loan terms and conditions, the money will be deposited into the guarantor’s account. You will then make arrangements with your guarantor to transfer the money over. Loan repayments are typically made in weekly or monthly instalments over the term, until the total amount has been paid back in full.

Your guarantor will only ever need to take over repayments and the responsibility of the loan should you, the borrower, default on the repayments.

Because guarantor loans are unsecured, your personal assets - like your house, are not taken into account or put at risk. However, it’s important to understand that guarantor loans are legally binding. This means that you and your guarantor are obligated by law to meet the terms and conditions.

We have created an easy-to-use guarantor loan calculator to help you calculate the cost of the loan.

What to expect from the application process

1. Apply with a UK lender

   Before applying, you need to make sure you meet the lender's criteria which can be found on their website. Applications are made online and can include information such as personal details, income and expenditures.

2. Lender reviews application

   The lender will check and verify your application to make sure the details are correct and that you can afford to pay back the loan. They will also perform a credit check. This decision is made within a matter of minutes, although sometimes they may ask you to send in more documents.

3. Review your loan offer

   If you are successfully approved, you will be presented with a loan agreement. The lender may offer you less than what you initially applied for. Please review this carefully and make sure you are happy before deciding to accept it or not.

4. Receive money

   If you accept the offer, the guarantor will receive the money directly into their chosen bank account. They will then arrange to transfer the money to you, the borrower either by online bank transfer, cash withdrawal or cheque. Learn more on why the money is paid to the guarantor

5. Repayments

   Payments will be taken via monthly Direct Debit until the loan is paid in full. If you default on your repayments, that’s where your guarantor will step in and continue repaying.

What does it mean to be a guarantor?

If you become a guarantor, you are essentially vouching or guaranteeing for someone. For personal loans, becoming a guarantor means that you're guaranteeing to repay their debt if they are unable to do so. This is a big financial commitment and it can impact your credit score.

Who can become a guarantor?

Pretty much anyone can become your guarantor if they meet the basic criteria. As long as the person you choose isn’t financially tied to you, i.e. not your husband or your wife, they can be a guarantor.

Guarantors to be aged 21 or older, preferably a homeowner as this increases credibility - but can be a non-homeowner, and they must have a good credit score and credit history.

Most people ask a close friend or family member to be their guarantor. It’s a big decision for someone to make with a handful of associated risks, so be sure to give them all the information they need to make the decision.

In summary, your guarantor will have to meet the following requirements:

• Be over 21 years of age
• A UK resident
• Have a regular income (wage, pension, etc.)
• Have completely separate finances from you
• Have a good credit history
• Can be a tenant or a homeowner
• They must agree and can show that they can make loan repayments if you are unable to

Should I become a guarantor?

As with any loan application, it’s not only important to assess whether the applicant can realistically afford the loan - but can they afford the repayment costs? Before you sign any loan agreement as a guarantor, you need to ascertain whether the borrower can afford the loan in the first place.

Ask yourself whether you can comfortably afford the loan repayments alongside your current expenditure and whether the borrower needs the loan they’re applying for. What are they using the loan for? Is it for a holiday they could save up for? Or something more necessary? Are they looking to consolidate their debts elsewhere?

Becoming a guarantor for a loan is a big responsibility and so you should take time to think about the risks, and whether it’s something you’re comfortable undertaking.

As a guarantor, you must be aware of the risks, including:

• You will become responsible for the debt if the borrower fails to pay, and that;
• The relationship between yourself and the borrower could become damaged

When deciding to become a guarantor, you should be able to trust the borrower that they will be able to make the payments and that you can afford to take on the debt if things go wrong.

If you have any doubt whatsoever, you should talk it through with the person asking you to be their guarantor. With that being said, if you are confident in your friend or family member’s ability to repay the borrowed money, there shouldn’t be any problems with you taking the guarantor position within the loan contract.

How much does a guarantor loan cost?

A guarantor loan is a type of loan that is veered towards people with poor credit. Because of this, UK guarantor loans can attract higher interest rates. Essentially, this means a loan with a guarantor will cost you more to borrow than other unsecured personal loans on the market.

But, by having a guarantor, it does make the loan agreement less risky for the lender and therefore, will likely come with lower rates than other types of bad credit loans, like a payday loan.

There are lots of factors that influence how much a guarantor loan will come to. Your credit history can impact the total cost of the loan, as well as term and how much you borrow.

Things to consider before taking out a guarantor loan

The main thing you need to be sure of before you take out any loan is - can you afford it. It’s not just the loan amount in full; you need to factor in the interest rates and any additional charges set by the lender. Do you need a loan, or could you save up your money to buy what you want instead?

Here are a few additional things you should consider before applying for a guarantor loan:

• Research and compare alternative funding options - these could include borrowing money from close friends or family, or selling unused items
• Shop around for the best deal - there are lots of guarantor loan direct lenders online, so it’s important to find one with competitive interest rates
• If you default on payments, you risk losing or damaging your friendship with your guarantor, so you should be certain in your ability to repay
• Make sure the UK lender is authorised and registered by the Financial Conduct Authority (check if they’re listed on the FCA register).
• Don’t borrow money if you think you will struggle to pay it back - you should never take out a loan if you have doubts in your repayment plan

As mentioned, it’s hugely important to do your research to find the best lender for your financial situation. As a broker, we do not charge you any fees to use our online loan matching service; this is an entirely free service. Here at ThisLender, we’re here to help you find a suitable loan product for your needs. So, if you’re looking for the top UK lenders, you’ve come to the right place, we only work with direct lenders.

The terms and conditions for each guarantor loan product are shared with you before you accept the loan offer; read these carefully and ensure you fully understand them. You will also receive all fees and applicable charges from the lender, so you can calculate whether the loan repayments in full are affordable and realistic.

Can I get a guarantor loan via a direct lender?

Yes, guarantor loans can be obtained through direct lenders, or using a loan broker - like us! At ThisLender we work with a panel of direct lenders who offer loans with guarantors, so when you apply through our website we'll do our best to present you with an instant online quote from a suitable lender.

We understand that applying for finance can be a daunting and often confusing process, which is why we aim to keep things simple. All you have to do is submit one easy application, and we’ll do the rest. Once you have the direct lender’s quote from us, you can decide if it best fits your needs.

I have bad credit, can I still apply for a guarantor loan?

Yes, of course. Guarantor loans for bad credit are extremely common - in fact, these loans have been specifically designed for people who have poor credit or very bad credit.

When you choose a guarantor loan, you are likely to receive better rates than if you choose another bad credit loan product. However, be advised that the guarantor you choose must have good credit.

How do I apply for a guarantor loan?

At ThisLender, we work with direct lenders in the UK; this means the process of applying for credit is usually straightforward. When applying for a small guarantor loan, we will ask for a few basic details.

In order to apply, you need to be over the age of 18, have a UK bank account and be able to demonstrate to the lender that you can afford the repayments. Our direct lenders focus on affordability, so will be looking at both you and your guarantor’s financial situation.

You can use our online loan matching service to find a guarantor loan that best suits your personal needs.

The pros and cons of guarantor loans

As with any loan product, there are both advantages and disadvantages to taking out a guarantor loan in the UK. It’s important to be aware of these, as well as the potential risks before making an application. The pros and cons of guarantor loans include:

The Advantages

• A good option for you if you’re struggling to secure a standard loan or have a poor credit history
• The loan can be processed quickly, which means you have access to funds fast
• A guarantor loan is unsecured; this means none of yours or your guarantor’s personal assets are taken into account
• Guarantor loans can help improve your credit rating if you successfully meet repayments on time

The Disadvantages

• If you fail to make repayments, you can damage your personal relationship with your guarantor
• Two people on the credit application work in a similar way to a joint bank account; it can affect both yours and your guarantor’s creditworthiness if payments default
• Guarantor loans can be expensive, with varied APR that is usually higher than other financial products. That’s why it’s essential to compare guarantor loans to find the best deal

What can I use my guarantor loan for?

One of the advantages of guarantor loans is that you can pretty much use them for anything you want - unexpected and/or emergency repairs, a new roof for your home perhaps and other renovation projects. Because there are no restrictions on loans with guarantors, the number of things you can spend your loan on is limited only by your imagination.

We don’t suggest applying for a loan unless you really need it - for example, you shouldn’t spend your loan on nights out with friends, clothes shopping or everyday essentials. Personal loans should never be used for leisure purposes. They exist to help people in financial emergencies when all other avenues have been exhausted.

Why compare guarantor loans?

Comparing guarantor loans will make sure you're getting a good deal. There are so many lenders with varying interest rates and charges, so for this reason it is a good idea to compare your options together with your nominated guarantor. This way, you will make sure you decide on a lender with rates that are affordable to you both.

What are the best guarantor loans?

The best guarantor loans depend on your financial situation. There is no one single best guarantor loan on the market, which is why we mentioned the importance of shopping around to compare deals.

If you’re pressed for time, ThisLender can help to streamline the process of finding a suitable guarantor loan. We use loan matching technology to provide you with an instant online quote from a trustworthy provider.

Guarantor loans FAQs

How much can I borrow and for how long?

When you apply for a guarantor loan through ThisLender, you can borrow from as little as £50 up to £5,000^†. However, your credit history and affordability (your income and expenditure) will have a big part to play in how much you can realistically borrow.

The majority of guarantor loans can be taken from one year up to a maximum of five years or more. Again, this will depend on your affordability. For example, borrowing over a longer-term will help keep monthly repayments lower, but will cost you a lot more in interest compared to a shorter term.

At ThisLender, the guarantor loans our lenders offer can be taken out over a period of 3 months to 3 years.

What does APR mean?

The APR is the ‘Annual Percentage Rate’ and measures the cost of the loan calculated over a year. Shown as a percentage, it includes the interest rate plus any other additional fees charged by the lender.

You can expect to see a guarantor loan APR range from 40% up to 50%.

Am I eligible for a guarantor loan?

With any loan, there will always be some conditions that you have to meet to be eligible for the loan. It’s no different with a guarantor loan. To be eligible, you must:

• A UK resident
• Be employed or have a regular income
• Be at least 18 years old when applying for the loan
• Currently have no debt management plan
• Not be in bankruptcy or been bankrupt previously
• Pass the lender’s affordability assessment

Can I get a loan with no guarantor?

Yes, you can. Although a guarantor is a compulsory requirement for a guarantor loan, there are other types of loans that do not require a guarantor such as:

• Personal Loans
• Short Term Loans

Find out more about no guarantor loans

Are guarantor loans a good idea?

For someone who has a less than perfect credit score or who just hasn’t built up enough credit to show they are a responsible borrower, it can be a good option to help build up your credit file. It can also give you access to funds that you just wouldn’t be eligible for if you were applying alone.

However, these guarantor loans do come with risks, and you and your chosen guarantor must be fully aware of them before going ahead. Never jump into a decision when it comes to borrowing money, do your due diligence to make sure you borrow responsibly.

Can a retired person be a loan guarantor?

Yes, providing the retired person has a regular income (such as a pension or other guaranteed income) and they can afford it. Whenever you apply for a guarantor loan online, affordability will be a major factor in determining approval.

What will happen if I can’t pay my guarantor loan?

If you fail to repay your guarantor loan, you will often incur additional charges that will be added to your loan. However, if you do miss a payment, the lender will contact you to try and resolve the issue. If this is not possible, the guarantor will be asked to step in and make those monthly payments.

Why is the money paid into the guarantor's bank account?

The loan is always paid directly to the guarantor to help protect you and them against fraud. Your guarantor can transfer the money to you via BACS, cash, or whatever method is best for you both.

Can a guarantor loan improve my credit score?

Yes, it can. Just like any other loan, if you manage to make the repayments on time, you will see a positive impact on your credit score. Should you miss or fail to repay, then this will leave a negative impact on your credit file.

A guarantor loan can be a good way of rebuilding your credit, so long as you are confident you won’t miss any payments.

Where do I go for help if I’m in financial difficulty?

If you are having financial difficulties or need to speak to someone regarding your financial situation before applying for a loan you can get free and confidential advice from MoneyHelper (formerly The Money Advice Service), National Debtline or debt charity StepChange.