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Borrowing with a guarantor

Could borrowing with a guarantor improve your chances of approval? Find out more about borrowing with a guarantor and how it affects your application and borrowing.

If you're struggling to get approved for a loan due to a poor credit history, choosing to borrow with a guarantor can help improve your chances of being accepted.

This kind of arrangement is deemed a less risky option for lenders, so there’s an increased chance of your application being a success.

Borrowing with a guarantor means you can often raise money without the higher interest rates or more unfavourable terms that can come with a bad credit loan. A guarantor should be someone you trust, with a good credit score and a secure financial situation of their own.

Find out what a guarantor is and how a guarantor loan could work for you with our guide.

What is a guarantor?

A guarantor is someone you trust, usually a relative, friend or partner, who agrees to take on responsibility for repayments on your loan should you become unable to do so. Having a guarantor can help those with a poor or no credit history get the help they need, without taking out a higher interest loan, because they offer an extra layer of security to the lender.

Remember to get the guarantor’s permission ahead of your application and be sure that they are able to cover the costs if you’re unable to do so.

Who can be a guarantor?

Anyone can apply to be a guarantor as long as they are over the age of 21 and have a stable financial history. Usually, this is a family member or friend who is willing to make the repayments if you cannot. Your guarantor can also be your partner, as long as you are not tied together financially in other ways, like having a joint account, loan or mortgage.

Be mindful that lenders may not accept if your guarantor is currently signed with someone else.

How much does a guarantor need to earn?

The total gross income for a guarantor doesn’t necessarily contribute to a loan approval. However, they do need to demonstrate financial stability with a good credit history and must be able to make loan repayments if needed.

Your loan application is more likely to be accepted if your guarantor owns their own home - but you must be sure the loan you’re applying for isn’t a secured loan, as this may use their home as collateral.

Guarantor loans

A guarantor loan is similar to a regular personal loan, but often offers better repayment terms as they are reinforced by the security of a guarantor. This means borrowers with a low credit rating can often get approved for a guarantor loan at a lower interest rate than they would if borrowing on their own. Not only that, the borrower is more likely to be accepted for a larger amount of credit.

However, it is still part of the agreement that the borrower can afford the repayments themselves. A guarantor loan should be used as peace of mind for the lender should the borrower’s situation change. Some lenders choose to pay the loan into the guarantor’s bank account, rather than the borrower’s, so trust between all parties is essential.

How do guarantor loans work ?

Guarantor loans work similarly to a standard unsecured loan. They are often used for a variety of means, from consolidating debt to putting down a deposit on a house. They are also often offered at a lower interest rate and with terms to better suit the borrower’s individual situation. This means even if you have a history of late or missed payments, you can still get approved for the loan you need, depending on your current financial situation.

Although a lender will ensure the borrower can meet the repayments before accepting the loan, you need to be aware of the risks should your finances change. A guarantor becomes liable for repayments the borrower is unable to meet. Therefore, before choosing a guarantor, you should consider the following:

With these things in mind, finding a guarantor should not be taken lightly. It’s worth considering whether you can rely on them financially or if their own finances will be at risk if your situation changes.

If you find yourself struggling to be approved for a personal loan, regardless of your circumstances, a guarantor loan could be the answer. At Norton Finance, we search a wide network of lenders, so you can find the best terms for your situation. Find out more about guarantor loans.


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