What are guarantor loans and how do they work?

A guarantor loan involves someone else agreeing to repay the loan if you can’t. That promise carries real weight, for both of you, so it's worth understanding fully before either of you signs anything.

What is a guarantor loan?

A guarantor loan involves someone else (usually family or friend) legally promising to pay your loan if you can't. It's a three-way agreement where the guarantor's good credit helps you borrow despite your poor credit.

The guarantor's promise covers the whole loan, for the whole term, from the day both signatures go on it.

Being a guarantor means:

• Full liability for the entire loan plus interest

• Immediate liability - not after attempts to collect from the borrower

• No control over the borrower's payments

• You can't cancel even if the relationship ends

• Legal action against you is possible

• Your home is at risk if CCJ leads to charging order

How does a guarantor loan work?

Applying with a guarantor adds steps a normal loan application doesn't have. The lender is really assessing two people, not one. It checks the borrower's ability to repay in the normal way, then checks the guarantor separately, because if the first check fails, the second one is what the loan actually relies on.

1. You apply and give the lender your guarantor's details.

2. The lender checks both your credit file and theirs.

3. The guarantor is contacted separately, to confirm they understand what they're agreeing to.

4. Both of you sign the legal agreement.

5. The lender usually pays the money to the guarantor first, as a fraud check.

6. The guarantor then sends it on to you.

That fifth step is the one that catches people out. It exists to prove the guarantor exists, knows about the loan and agreed to it, not because the guarantor is borrowing anything themselves.

The lender has duties too. It must check whether the guarantee could harm the guarantor’s own finances, just as it checks the borrower. A guarantee never replaces the borrower’s own affordability check. Under the Consumer Credit Act 1974, a default notice must go to the guarantor as well as the borrower. FCA guidance says this must happen before a lender enforces the guarantee. A letter asking you to pay isn’t the same as that process. Check any lender on the FCA Register before either of you signs.

Rates vary widely across our panel, starting from 9.3% APR. High-cost short-term loans are price-capped by the FCA; APR explained shows how the cap works.

When guarantors pay

Losing a job is the biggest single reason a guarantor ends up making payments. Next come a relationship breaking down, losing touch with the borrower, or the borrower refusing to pay. Liability is immediate. The lender doesn’t have to chase the borrower before it asks you.

When is a guarantor loan a good idea?

A guarantor is a tool for a specific problem, not a first step for everyone with poor credit. It tends to help in a few situations.

None of this is permanent. Many applications don't need a guarantor at all. Our panel assesses income and outgoings directly, and several lenders specialise in imperfect credit. Check what you qualify for on your own first.

Apply now

One application searches our panel of FCA-authorised lenders instead of applying to each in turn, so there is one search on your file rather than several.

£

Get your quote No obligation. 100% secure

Enter an amount in pounds, from £50 to £5,000.

No obligation · 100% secure · £50 to £5,000

Excellent TrustScore 4.8 | 8,051 reviews Read our reviews on Trustpilot

Will I be approved?

Checking your eligibility uses a soft search only, so it will not affect your credit score.

Check eligibility Soft search. Won’t affect your score

Representative example: Amount of credit: £500 for 6 months at £100.22 per month (final payment £100.21). Total amount repayable of £601.31 Interest: £101.31 Interest rate: 66.49% pa (fixed). Payday UK is a registered trading name of Payday Loans Ltd, who are an appointed representative of Flux Funding Limited, who are a credit broker, not a lender. Registered in England and Wales (Company number 12430457 / FRN 921539).

What are the risks of a guarantor loan?

The biggest risk isn’t always the money. It can be the impact on your relationship if the borrower can’t repay.

Guarantor loans have attracted significant complaints. The Financial Ombudsman received over 10,000 new guarantor loan complaints in a single quarter, and upheld 88% of the cases it closed the quarter before. Complaints included unaffordable lending, guarantors saying they hadn’t properly agreed, and concerns about pressure to become a guarantor.

Unlike lending money to someone yourself, a guarantee is an agreement with the lender. If the borrower can’t pay, you may be asked to make the repayments instead.

That’s why it’s worth thinking beyond whether you trust the borrower. Before agreeing, ask yourself whether you could afford to repay the whole loan yourself if things went wrong, and whether you’d still be comfortable with the arrangement afterwards.

What to look for when comparing guarantor loans

The most important question with any loan is whether you can comfortably afford the repayments. With a guarantor loan it matters even more, because a missed payment can eventually land on someone else.

Always check the total amount repayable, not just the monthly figure. Two loans with similar monthly payments can cost very different amounts across a full term.

Worth checking on any offer you receive:

• The APR and the total amount repayable over the full term

• Early repayment terms, and what repaying early saves you

• The length of the term and how the monthly payment fits your budget

• What your guarantor is agreeing to, in plain terms

• Any default or late payment charges

• How the lender handles missed payments before contacting a guarantor

Who can be a guarantor for a loan?

The requirements for being a guarantor are about the guarantor's ability to pay rather than their good intentions. A lender assesses them as though they were taking the loan themselves, which is why a homeowner with a clean file is the best candidate.

Requirements typically include:

• Aged 21-75

• UK resident 3+ years

• Good credit history

• Homeowner or stable tenant

• Separate address from borrower

• Can afford entire repayment

• Not financially linked to borrower

What does a guarantor need to provide?

A guarantor goes through most of the same checks as the borrower. Expect to provide:

• Proof of identity, such as a passport or driving licence

• Proof of address, usually a recent utility bill or bank statement

• Proof of income, such as payslips, a pension statement, or self-employment accounts

• Recent bank statements, so the lender can see existing commitments

• Evidence of homeownership, such as a mortgage statement, if the lender asks for it

• Consent for the lender to run a credit check in their own name

The lender contacts the guarantor directly for this, rather than relying on anything the borrower provides on their behalf.

Does being a guarantor affect your credit score?

Not straight away, and not just for agreeing. Most lenders don’t put anything on your credit file just because you’re named as a guarantor. The credit check itself leaves a mark, the same as any application would.

It changes if you're called on to pay. If the borrower misses payments and the debt lands on you, that shows on your file the same way it would if it were your own loan, and it can affect your own future borrowing from that point.

It's also worth declaring separately: a mortgage lender will ask if you have any guarantees, and count the full monthly repayment as a commitment when working out what you can borrow, whether or not you've ever actually paid anything.

Can you get out of being a guarantor?

No, not by yourself. The agreement runs until the loan is repaid, and it survives a break-up, a falling-out or the borrower moving abroad. Either the borrower repays or refinances without you, or the lender agrees to swap in another guarantor, which is rare. If you were pressured into it, or the affordability checks were poor, complain to the lender first. Take it to the Financial Ombudsman on 0800 023 4567 once they send their final response, or 8 weeks have passed.

Alternatives to guarantor loans

Before asking anyone to guarantee a loan, check our guide to alternatives to payday loans. Two routes here don’t involve anyone else.

• Building credit first - a few months of on-time payments on a small, secured credit-builder card can widen what's on offer without involving anyone else.

• Borrowing a smaller amount in your own name - often achievable on your own income alone, even with a thin or imperfect file. See how much you could borrow with a short term loan today.

When to say no to being a guarantor

Some people should decline whatever the relationship. The test is not whether you trust them, but whether your budget survives this loan going wrong for the whole term, starting with the first missed payment.

• You could not pay the full monthly repayment from your own income, every month, for the whole term.

• You have a mortgage or remortgage coming up. The lender will count the full guarantee payment as a commitment.

• You are on a fixed income, such as a state pension, and the payment would come out of essentials.

• Your savings are your emergency fund.

• The real problem is gambling, addiction, or someone else controlling the borrower's money. A loan treats the symptom.

• You are being leaned on. The Financial Ombudsman's page on guarantor loans lists "I was pressured or forced into being a guarantor" among the complaints it hears from guarantors.

• You would want the arrangement kept secret from your own household.

Common questions

What does a guarantor do?

A guarantor promises to repay a loan if the borrower can't or won't. They sign the agreement alongside the borrower and become legally responsible for the debt from the day they sign, not as a fallback that only applies once other options have run out.

Can a guarantor be retired?

Yes, provided they can show they can afford the full monthly repayment from their income, a private or workplace pension, for instance. A state pension alone rarely satisfies a lender's affordability check, though it varies between lenders.

Does a guarantor have to be a homeowner?

Not always, but it's the profile most lenders prefer, because it points to financial stability and, in the worst case, an asset a debt could ultimately be recovered against. Some lenders will accept a guarantor in long-term, stable rented accommodation instead.

Does a guarantor have to be working?

No. They need to show they can afford the repayment from some income a lender is willing to count. This can be from employment, a pension, or savings, rather than needing a job specifically.

Can I be a guarantor with bad credit?

Generally no. Lenders need a guarantor with a strong credit history, because that's precisely what's meant to offset the borrower's weaker one. A guarantor with poor credit themselves is usually declined outright.

What happens to the guarantee if the borrower goes bankrupt or dies?

The guarantee outlives the borrower's own liability. Formal debt solutions clear the borrower, not you.

• Bankruptcy: discharge releases the borrower, but insolvency law keeps the liability of anyone who stood as guarantor.

• Debt relief order: the same rule applies. The borrower’s debts are discharged, but not your liability as guarantor.

• Individual voluntary arrangement: it binds creditors as to the borrower and does not release you unless it says so.

• Breathing Space pauses action against the borrower only. National Debtline's Breathing Space guide says someone who has given a personal guarantee for an included debt gets no protection, though you can apply for your own.

• A hardship write-off: the creditor can turn to the guarantor instead, so the borrower should warn you first.

• Death: if the borrower dies, the debt normally becomes a claim against their estate, and any shortfall can still be pursued from you. If you die first, it normally becomes a claim against your estate. Your guarantee's wording decides, so read it.

StepChange's page on guarantor loan debts sets out what happens when one is not repaid. Read it before you agree anything.

Are guarantor loans still available in the UK?

Yes, but from far fewer lenders than a few years ago. Amigo, once the largest guarantor lender, stopped lending and went into wind-down after a wave of complaints, and several smaller providers followed. A handful of specialists remain, usually at a high APR.

What happens if the borrower stops paying and I can't afford the repayments either?

The lender still comes to you. You are liable for the whole balance from day one. The missed payments land on your credit file as well as theirs. Left unpaid, that can become a default, then a county court judgment, or a decree in Scotland. In the worst case, a court can secure the debt against your home. Tell the lender early, because most will agree a payment plan. The free debt advice below can help you both.

A guarantor loan isn't automatically the wrong choice for either of you. But it's a decision for two people, not one, so read this whole page, and make sure "can I afford this alone" is genuinely yes on both sides before anyone signs.

Through Payday UK a guarantor is never required: our panel lends loans with no guarantor from £50 to £5,000 in your own name.