A guarantor loan is a type of loan where someone else is responsible for making your payments if you cannot.
You might have heard this being called a bad credit guarantor loan, because people with a bad credit history are more likely to be able to get one. Your credit history is your record of paying off debts.
Having a guarantor reduces the risk to the lender because they have a back-up plan if you do not pay. This means you are more likely to get the loan you need.
A guarantor loan for bad credit is an unsecured loan, which means the debt is not linked to your home, or any other asset.
Is a guarantor loan best for you?
If you're struggling to get a loan because you have a low credit score, or you have no credit history, look at bad credit guarantor loans.
You have a better chance of getting a guarantor loan than another kind of loan.
To get a guarantor loan, you usually need to be over 18 years old, have a bank account and be working.
How do guarantor loans work?
A guarantor loan works a lot like a personal loan in that:
you can usually borrow between £1,000 and £10,000
you usually repay it over one to five years (known as your repayment term)
you pay interest on top of what you borrow (known as APR)
repayments are split evenly across your repayment term so you pay the same amount each month.
The difference is that with a guarantor loan you have a second person who agrees to make your payments if you cannot keep up with them.
Remember, though, that you have a responsibility to only borrow what you can afford to pay back. Our loan calculator is a helpful tool to work out what your monthly payments would be.
Once you have applied for your guarantor loan, it will usually be paid out within 48 hours. It can be delayed if the lender cannot contact your guarantor, you apply at the weekend, or if you live in Scotland or Ireland.
The money will often be paid into your guarantor’s bank account. This is for security reasons and to double check that they agree to be your guarantor.
Who can be your guarantor?
Before you start looking at bad credit guarantor loans, think about who you want to ask to be your guarantor.
If you decide to go for a loan with a guarantor, it could be a friend, family member or colleague, but they must:
be at least 18 years old (or 21 in some instances)
be in full-time employment
not be your spouse
not be someone you share a bank account with
not be financially linked to you.
Some lenders have stricter rules and might insist that your guarantor has a strong credit record, or that they are a homeowner.
Remember that whoever you choose as your guarantor will have to pay back your loan if you cannot for any reason. If they don't, they could be taken to court. It’s important that your guarantor understands their responsibility before you go ahead with a guarantor loan for bad credit.
How to find the best guarantor loans
Remember, to see the best guarantor loans for you, you need to:
decide how much you want to borrow
decide how long you need to pay back the loan
check the guarantor criteria and exclude any guarantor loans that are not a good fit.
Then it’s time to start looking for the guarantor loans that are cheapest to pay back. This will be affected by:
the amount you borrow
the length of your loan term.
Shop around to find the best best guarantor loans and our comparison table is a good place to start.
Things to look out for with a guarantor loan
APR or interest on your guarantor loan is likely to be much higher than with a normal loan.
Our loan calculator can tell you how a higher APR will affect the monthly repayments. This will help you to understand why finding guarantor loans with low APR is important.
The risks that come with guarantor loans are the same as with any personal loan. Your guarantor faces the same risks as you do. These include:
the debt being hard to manage
damage to your credit score if you miss a payment
legal action against you if you miss payments.
Is a credit check needed for guarantor loans?
You should avoid making too many applications for guarantor loans in a short space of time as it could affect your credit history.
A better approach is to use our comparison table to see which loans are right for you. You need to make sure you fit the requirements before you start applying.