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Finding the best guarantor loan for you

By Laura Rettie, Personal Finance Journalist.

Laura Rettie

Guarantor loans are a unique type of loan. Our guide will tell you how they work, and how to find the best guarantor loans for your situation.

How do guarantor loans work?

Guaranteed loans work in the same way as a personal loan. If your loan application is successful, you’ll pay interest on the sum borrowed and pay it back in monthly instalments.

When you apply for a guarantor loan, you’ll need to find someone with a good credit rating who is prepared to settle your debt if you can’t pay back what you owe.

Your guarantor reduces the loan provider's risk to lend to you. Your guarantor will have their credit history checked, will be asked questions about their income and asked to provide documents to prove their identity and income when you apply for the loan.

Some lenders may offer you a loan with a two-week cooling-off period. The provider will give the money to your guarantor initially and they can decide whether to give it to you or return it to the lender within 14 days.

The key features of a guarantor loan are:

  • Requires a guarantor
  • Available from direct lenders
  • Borrow £1,000 to £20,000
  • Repay between 1 and 5 years
  • Rates from 29% APR

You will need to hold a UK bank account and be over 18 years to be eligible for a guarantor loan. You’ll also need to show the lender you can afford repayments.

Who can qualify as a guarantor?

A guarantor will need to have a good credit score, a regular income and be financially secure. They must be a UK resident, over 21 years and sometimes providers will require them to be a homeowner.

Guarantors can be a:

  • Friend
  • Parent
  • Sibling
  • Relative
  • Colleague
  • Spouse or civil partner*

* Your spouse or civil partner will need to have a separate bank account and income source.

Are there any cons for the guarantor?

Yes, there are many drawbacks for a guarantor, so it usually helps if you have a close and trusting relationship with the person guaranteeing your loan.

As part of the application process, guarantors have to undergo the same checks as the person applying for the loan so they’ll need to agree for their credit history to be checked. When a provider does this, it's usually only a soft check, meaning that it won’t appear on their credit report.

A guarantor will also need to provide:

  • Bank details
  • Proof of ID
  • Bank statements
  • Proof of earnings
  • Mortgage statements

The act of being a guarantor won’t appear on their credit report, but if they fail to cover the repayments you’ve missed, their credit rating could be affected, and future borrowing may be more difficult for them.

Another risk for the guarantor is that legal action could be taken against them if they fail to honour the guarantee and the debt is left unsettled.

Finally, acting as a guarantor could affect their future chances of getting a mortgage approved.  Mortgage lenders look closely at an applicant's financial profile, and being a guarantor is seen as carrying a potential debt that will impact their affordability.

What are the pros and cons of guarantor loans?


  • Ideal if you have a poor credit score or difficulty getting a personal loan
  • Once approved you’ll get the money in your account quickly
  • You can rebuild your credit score if you make repayments regularly and on time


  • Interest rates are typically much higher than a standard personal loan
  • The guarantor is risking their credit rating, and it could be more difficult for them to obtain a mortgage
  • If you don’t keep up repayments, it will impact your credit rating and could lead to further debts
  • You’ll need to disclose your financial situation to your guarantor

Are guarantor loans a good idea?

If you need to borrow money and have no other options available, a guarantor loan is worth considering as a last resort if you’re sure you can repay the loan on time.

If you opt for a guarantor loan, make sure you:

  • Shop around for the lowest APR
  • Keep up your repayments to help to improve your credit score
  • Pay off your loan as early as possible to minimise interest costs
  • Use a loan calculator to find out your eligibility so you aren’t left with a hard search on your credit report

Are there any alternatives to guarantor loans?

Debt consolidation loans: These loans are an effective way of getting on top of multiple debts. With a debt consolidation loan you’re able to borrow to consolidate your debts into one, more manageable monthly payment. 

Debt consolidation loans can be particularly useful if you’re struggling to keep track of the money you owe; helping you to take control of your finances and rebuild your credit score.

Peer to peer loans:  Also known as P2P, peer to peer lending is an online platform that helps people to borrow from each other rather than a bank or lender.

Often, peer to peer loans are easier to obtain than traditional personal loans, however your eligibility will still be subject to the relevant affordability and credit checks. Your credit score will determine the rate of interest you’ll be charged, which means it could be high depending on your personal circumstances.

Personal loans:  This is an unsecured loan from a bank, building society or lender. You do not need to provide collateral, and the repayment terms tend to be more flexible. However, a poor credit score may mean you’ll be charged higher interest rates or have your application rejected.

Secured loans:  This type of loan is secured against your home or a property you own. This equity is used as collateral, so if you can’t repay the loan, the equity in your property will be used to settle the debt.

Secured loans are usually for borrowing large amounts of money over a long period, so if you want to borrow a small amount for a short time they may not be the best option. However, secured loan interest rates are often lower than personal loans or credit cards and you can get one even if your credit rating is poor.

More loan options

Read more about different types of loans; 12 month loanscar loans, short term loans and home improvement loans

The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.

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Frequently asked questions

What happens if a guarantor does not pay?

If a guarantor refuses to honour the agreement and settle your debt on your behalf, the lender may take legal action. A warning letter will be sent to the guarantor, and court proceedings could take place 14 days afterwards if the outstanding sum hasn’t been paid within this period.

Can I stop being a guarantor for a loan?

No, once a guarantor has signed the credit agreement and the money is paid into the bank account of the person borrowing the money, you cannot change your mind or withdraw your guarantee. The lender can’t remove the guarantor from the agreement because the guarantor’s credit history, income and financial credibility were used to secure the loan approval.

Are there guarantor loans with a low APR?

No, all guaranteed loans tend to have high interest rates and are an expensive form of borrowing.  It’s worth shopping around for guarantor loans with low APR by using comparison websites and brokers. 

Make sure you use a soft or smart search facility to check your eligibility for any loans before applying.

Can you get instant guarantor loans?

No, it’s unlikely you’ll find instant guarantor loans, but you may be able to get instant approval in principle.  

Guaranteed loans require two people to provide all evidence required and sign the agreement, so the process may take longer than a personal loan application with a bank. However, once the loan has been approved, you’ll often get the money in your account within 48 hours, with the best guarantor loans doing so quicker.

What is a guarantor loan?

Guarantor loans, also called guaranteed loans, are a type of personal loan offered by direct lenders and brokers.  It differs from a regular loan because another person guarantees to honour the debt and make repayments if you can’t pay it back yourself.

The person that guarantees repayment is called a guarantor, and they’re typically a family member, friend or employer.

Guarantor personal loans are usually taken out by people with a bad credit score, no credit history or who have low incomes.  People may choose to get a guarantor loan when they’ve been turned down for a personal loan.

Can I get a guarantor loan with bad credit?

Yes, in fact, guarantor loans are a useful option if you have a bad credit score and you’ve struggled to get a personal loan.

If you keep up repayments and make them on time, it could help you build your credit score, so borrowing in the future becomes easier.

The downside is that interest rates are usually much higher than a normal personal loan. Due to that, It’s commonplace to explore other loans before applying for a guarantor loan; otherwise, you may borrow more than you need. If you can, pay your loan back as soon as possible.

How much do guarantor loans cost?

Unfortunately, guarantor loans are more expensive than other types of loans because they’re normally the last resort for people with bad credit.

Expect to pay an APR of at least 29% and often a lot more.  Interest rates over 50% mean you could potentially pay more in interest than you borrowed.

Example:  A loan amount of £3,000 for 3 years with an APR of 47.8% will cost you £5,178.24.

The best guarantor loans are ones with the cheapest interest rate, so look for a guarantor loan with the lowest APR.