A guarantor loan could be an option if you have a poor credit history or are struggling to get a loan. Find out who can be a guarantor and it can help you get credit.
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Find our best available guarantor loan deals using the table. Comparing loans allows you to see what’s available across the market and helps you to find the best deal that meets your needs.
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Find a deal that offers the lowest interest rate across a term that’s just long enough to keep the monthly payments affordable, so you don’t end up paying more interest overall than you need to.
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Select your deal and fill out a loan application form. You’ll need to provide your financial details and contact information. The lender will then assess whether you can afford to repay the loan.
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The key difference between a guarantor loan and other loans is that you need a third party – typically a family member or friend – to “guarantee” to pay off the debt if you can’t. The mechanics of the loan are the same as with other types: you borrow money from a lender then pay it back in instalments, which include interest.
Guarantor loans are designed for those who may not be eligible for standard loans because they have a poor credit history. Lenders are more likely to grant this type of loan to those with bad credit because it reduces their risk – if the borrower defaults at any time on their repayments, the guarantor steps in to pay back the loan.
Bear in mind that the interest on guarantor loans is often extremely high, sometimes as much as 50% APR. Debt charity StepChange warns that this means you could end up paying back more than double the amount you borrowed over the period of the loan.
To qualify for a guarantor loan, you need to be:
A UK resident
Able to demonstrate that you can pay back the loan
Have a minimum level of income
May also have a maximum age limit based on how old you will be when you finish paying back the loan.
You cannot be subject to a current Individual voluntary arrangement (IVA) or bankruptcy order.
All loan providers accept applicants with a poor credit history, provided that their guarantor has a good credit rating.
A guarantor needs to be someone who is willing to support you and is:
Someone who knows you well
Aware of the responsibilities of a guarantor
Aged between 18 and 75
In receipt of a regular income (a wage or pension)
A UK resident
A UK bank account and debit card holder
Able to afford the monthly payments if you can’t
Some loan providers have stricter rules and may also insist that your guarantor is:
Someone with a good credit record
Not your spouse
Receiving a certain level of income
You need to make sure that your chosen guarantor knows what responsibilities they are taking on, including having to step in and pay off your loan if you are unable to.
It’s advisable for any guarantor to take legal advice before signing a contract.
You should also let your guarantor know why you want the loan and how you plan to repay it.
Your lender will ask about your relationship with the guarantor. Lenders prefer someone close to you, like a family member or friend, because they believe that they are more likely to take their responsibility seriously and pay back the loan.
Decide how much you want to borrow
How much money you need plays a major role in whether you'll be accepted for a loan, as you can only borrow what the lender thinks you can afford to pay back.
Calculate what you can afford to pay monthly
Getting a sense of how much you can afford to pay each month after your living costs is vital for making sure you get the right deal for your circumstances.
Find your guarantor
Before you compare guarantor loans, check if the person you have in mind to be your guarantor is happy to do so and discuss the loan and repayments with them.
Compare guarantor loans
By using our comparison service, you can make sure you know what deals are available in the market so you can make an informed decision about which to choose.
Since the lender is taking more risk by lending to a borrower with bad credit, interest rates are typically higher on guarantor loans than on regular personal loans.
The interest rate charged will depend on your specific circumstances and can vary significantly – anywhere between about 20% and 50% APR.
The interest rate also depends on your lender and can fluctuate over time. You can usually borrow between £500 and £15,000, for a period of between one and five years – again, depending on the lender.
Guarantor loans are designed for those who are struggling to get approved for standard loans.
The main advantage is that they allow people with bad credit to borrow money. If you can afford to repay the loan and have a reliable guarantor with a good credit history, it’s likely you’ll be accepted for a guarantor loan.
These loans can be processed quickly and arrive in your account within a few days, so you can use them for emergencies or essential purchases or to consolidate existing debt. They can also help you improve your credit score, which would allow you to apply for loans and credit cards with lower rates in the future.
Guarantor loans generally have higher interest rates than standard personal loans, meaning you could pay back significantly more overall than with standard loans.
There’s also a risk that if your guarantor isn’t able to make the repayments should you become unable to, their credit score could be impacted, which could in turn, affect their ability to get credit in the future. In some cases, missed repayments can lead to court action or repossession of assets.
It’s worth bearing in mind that you could damage your relationship with your guarantor if you fail to make a repayment on a guarantor loan or default on it entirely. And that’s on top of the financial and credit score implications.
Before agreeing to be someone’s guarantor, it’s vital to be fully aware of what’s involved and the potential repercussions. If you’re in doubt, seek legal advice. Here are a few useful tips:
Write out a simple written contract with the borrower stating how you want to communicate, how often you want to receive updates, and in what circumstances they should get in contact with you.
Ensure that the guarantee is limited to that specific loan and that the borrower cannot use your guarantee for other loans such as mortgages or credit card debt.
When agreeing to be a guarantor, you’ll receive a copy of the agreement, the borrower's repayment schedule and the guarantee contract. Make sure you keep all the documentation somewhere safe and create digital copies if necessary.
You can read more about whether you should agree to be a guarantor.
"Although guarantor loans can be a good option for people who are otherwise finding it difficult to get credit, it’s important that you and the guarantor are fully aware of the risks involved.
"Interest rates on these loans can also be quite high, and thus lead to further problems, so it's better to consider all other options before you opt for a guarantor loan."
There are some alternatives to guarantor loans that may be worth considering depending on your specific circumstances.
Credit unions often offer smaller loans at lower interest rates than those designed for people with bad credit. Credit unions can, by law, only charge a maximum of 3% a month (42.6% APR) in England, Scotland and Wales and 1% in Northern Ireland (12.68% APR). They usually lend for up to five years if the loan is unsecured, and up to seven years if the loan is secured, although some let you take out a secured loan for 25 years or more.
These loans can be helpful for people with bad credit and sometimes offer options to pay loans back weekly rather than monthly. However, you’ll have to be a member of a credit union in order to apply for a loan and some require you to build up some savings beforehand.
Unsecured loans are loans that don't require an asset, such as a house or car, to be used as security. They’re usually more expensive than secured loans as they’re riskier for the lender.
Make sure you use an eligibility checker before applying for an unsecured loan. This lets you find out if you’re likely to be approved for the loan you’ve chosen so you don’t end up making multiple credit applications over a short period of time, which can negatively affect your credit score.
If you have bad credit, you may still be able to get a loan, but you'll usually pay a higher interest rate and be more limited in how much you can borrow.
As a borrower, you can receive a loan directly from another person via an online peer-to-peer lending platform. This can be a good option for those who don’t want to go through a bank and want more flexible repayment periods. However, many P2P platforms will require you to pass a credit check and you may need to pay an application fee.
Lenders should also be aware that any money invested in P2P is not protected under the Financial Services Compensation Scheme (FSCS), meaning you could lose your money if the P2P company goes bust.
Finally, credit cards are another borrowing option. Pick one with the lowest interest rate for borrowing that you can get. Some even offer 0% on purchases for a certain period of time when you first take them out.
If you have bad credit, you could opt for a credit-building credit card. This type of card has more lenient eligibility requirements. However, as with most bad credit borrowing, the interest rate is likely to be much higher than for regular credit cards, and credit limits will also be lower. If you use it responsibly, however, it can help to improve your credit score.
For those who are having trouble keeping up with debt payments, it's really important to seek help. The first step is to speak to your lenders and see if you can work out a manageable payment plan to reduce your debt.
If that doesn’t work, there are debt charities you can contact that offer free debt advice to help you get out of debt¹.
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It varies depending on your credit history and your income, but you can usually borrow between £1,000 and £15,000.
Yes, they can cost more than standard unsecured loans because the rates are higher, but they may be cheaper than other bad credit loans.
In some cases, yes. But some providers will not allow a spouse to be a guarantor.
The person listed as your guarantor will be responsible for paying back your loan. If your guarantor cannot pay your loan, they could be taken to court.
Your guarantor may have to pay back the rest of your loan. Read the terms of your loan and check your guarantor is happy with them before you apply.
Yes, if you fail to make your repayments. Be aware that making too many applications for credit in a short space of time can also negatively impact your credit rating.
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