What is a guarantor loan?
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In short: An unsecured loan where someone else — usually a family member or close friend — agrees to repay it if you cannot. Both you and the guarantor are legally responsible, and missed payments affect both credit files.
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Reviewed by Kaiser Khan
A guarantor loan is a personal loan where a second person, the guarantor, signs a legal agreement to cover repayments if the borrower defaults. Lenders often use them when the borrower has a thin credit file, has had past credit problems, or cannot show a long enough income history for a standard unsecured loan.
The guarantor is not just a reference — they are fully liable for the debt if you stop paying. That means the lender can pursue them for the full outstanding balance, and any missed payments are recorded on both credit files. Guarantors are usually homeowners with a stable income, though requirements vary by lender.
Guarantor loans are regulated by the Financial Conduct Authority and must follow the same affordability and fair-treatment rules as other consumer credit. Before agreeing, compare the total cost (APR and fees), check whether you could borrow through a credit union or improve your credit score first, and make sure the guarantor understands they may have to pay.
If you are asked to be a guarantor, treat it as seriously as taking out the loan yourself. Only agree if you could afford the repayments without hardship and you trust the borrower to keep paying.
Primary source: gov.uk/personal-loans
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