18 May 2021

What is a guarantor loan?

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A guarantor loan is essentially taking out a loan with an additional person. The person will usually be a family member or a friend who promises to pay back the loan, should you be unable to repay your debt.

A guarantor loan typically appeals to individuals who may have poor credit history and are looking to borrow between £1,000 up to £10,000. The guarantor increases the chances of a loan application being accepted.

What if I fail to make my monthly repayments?

Should you be unable to meet your monthly repayments as they fall due, the responsibility to ensure the repayment of the loan will become the guarantors.

Who can be a guarantor?

Guarantors usually tend to be family members or close friends. The guarantor would need to hold a UK bank account and would need to have a good credit history. This is so that the loan provider would be satisfied that the guarantor will be able to make repayments as they fall due, in the event you are unable to. The guarantor also needs to be 21 years of age or over, although there are a few exceptions where firms accept an individual to be 18 years of age.

Shall I be a guarantor?

This decision can often be one led by emotion as the individuals you are becoming a guarantor for are usually family members or close friends. Ultimately, you need to consider whether you trust the individual, not on a personal capacity, rather in a financial capacity. It is also important to keep in mind that the interest pay on the loan is generally much higher than that of a standard loan. Some are commonly as high as 49% APR.

Some questions you may want to consider are:

  1. Can the individual taking out the loan afford it?
  2. Is the individual taking out the loan responsible in making repayments on a monthly basis as payments fall due?

However, the main question to ask yourself is whether you are comfortable meeting the monthly repayments, should the individual not be able to.

What if the guarantor fails to make payments?

It is particularly important for the guarantor to make repayments where required as they can be taken to court for failing to do so. This could also potentially expose them to further legal costs as well as their personal assets being repossessed.

This will then in turn impact your credit report. It is important to note that simply acting as a guarantor does not impact your credit report, rather it is only where you fail to keep up with repayments.


The information in this blog is for general information purposes only and does not purport to be comprehensive or to provide legal advice. Whilst every effort is made to ensure the information and law is current as of the date of publication it should be stressed that, due to the passage of time, this does not necessarily reflect the present legal position. Connaught Law and authors accept no responsibility for loss that may arise from accessing or reliance on information contained in this blog. For formal advice on the current law please don’t hesitate to contact Connaught Law. Legal advice is only provided pursuant to a written agreement, identified as such, and signed by the client and by or on behalf of Connaught Law.

About the Author

Saad Abbas Hussain heads the Financial Disputes and Banking department at Connaught's. He has accumulated extensive industry experience within dispute resolution, regulation, and financial services, having previously worked for the Financial Conduct Authority (FCA) and the Financial Ombudsman Service (FOS).

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