(Updated 19 September 2023)

Guarantor Loans: What You Need To Know

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What are guarantor loans?

Getting a personal loan when you have a low credit score or low income can prove difficult, but you may be able to access a guarantor loan – as this involves the financial backing of a family member or friend.

A guarantor loan is a personal loan that’s guaranteed by someone else – they’re known as the guarantor. If you’re unable to pay your loan, the guarantor will be required to pay.

Who can get a guarantor loan?

Each lender will have specific requirements, but generally, you’ll need to hold a UK bank account, be over the age of 18 and be in employment, alongside having someone willing to guarantor you.

Who can be a guarantor?

Guarantors are usually someone you know well, maybe a friend or family member. They tend to need to be over the age of 21 and have a good credit history; however, you can’t have a ‘financial association’ to them – for example, a joint bank account or mortgage.

What are the downsides to guarantor loans?

If you’re unable to pay your loan, the guarantor will be expected to step in and make payment on your behalf; this can cause tension between you and the guarantor, so it’s important to discuss this in detail with them before you decide if it’s a good option.

Guarantor loans don’t usually offer a favourable interest rate, so it’s likely that you’ll pay back a lot more than you borrowed.

As guarantor loans are a more specialised product, there are also less providers, so you won’t have as many options to chose from, compared with a typical personal loan.

What are the risks to the guarantor?

Some guarantor loans will require the guarantor to be a homeowner, so that they can secure the debt against the property – this could put the property at risk if both the borrower and guarantor can’t pay.

The guarantor can’t have their liability for the loan removed until it’s paid in full, which could be a long time.

If payments are missed, they could be recorded on the guarantor’s credit file, making it harder to obtain credit in the future.

Can I put my guarantor loan into a debt solution?

Yes, but there are risks involved. Let’s explore risks for an Individual Voluntary Arrangement (IVA), Bankruptcy, Debt Management Plan (DMP) and a Debt Relief Order (DRO).

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Guarantor Loans and an IVA – you could still qualify for an IVA whilst owing a guarantor loan. It just means that your liability of the debt would be removed, leaving the guarantor liable for the outstanding balance.

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Guarantor Loans and a DMP – if you can afford to pay something towards other debts you have whilst making the contractual payment to the guarantor loan, you could consider doing this, but if not, the debt will get a fair share of the money you pay to the DMP and the guarantor chased for the shortfall.

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Guarantor Loans and a DRO or Bankruptcy – if a DRO or Bankruptcy suits you best, you can still explore those solutions with guarantor loans. Your liability to the debt would be removed and the guarantor would have to pay the outstanding balance.

Unaffordable lending complaints

There’s been a lot in the news regarding unfair and unaffordable lending complaints. If you feel you’ve been affected, check out our article here for some advice.

If you’re struggling with debt, whether it be a guarantor loan or not, we can offer free, impartial, and completely confidential debt advice, either online, via telephone or also on live chat.

Don’t have an account with us and are looking for debt advice?

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Angel Advance provides online debt advice to get you back on track and make your finances more manageable.

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