What is a guarantor loan?
Written byEmily Tye
Updated:Mar 26, 2026
5 min read
A guarantor loan is a type of personal loan where a second person, known as the guarantor, agrees to repay the debt if the borrower cannot. Lenders offer this arrangement to people who may not qualify for a standard loan on their own, usually because they have a poor or limited credit history.
What is a guarantor on a loan?
A guarantor is someone who legally promises to cover the loan repayments if the primary borrower stops paying. They do not receive any of the loan money. They simply provide a guarantee to the lender that the debt will be paid.
If the borrower misses a payment, the lender can contact the guarantor and ask them to cover it. The guarantor becomes legally responsible for the outstanding balance, which can include any interest and fees that have built up.
Guarantors are usually a close friend or family member. Some lenders also accept someone with no close personal connection to the borrower, provided they meet the lender's eligibility criteria.
"Acting as a guarantor is a serious legal commitment, not just a favour. Before agreeing, make sure you have read the full loan agreement and are comfortable covering the repayments if it comes to that. Some people say yes without fully understanding what they have signed up for, which is when things can go wrong."
5 years in financial services
How does a guarantor loan work?
When you apply for a guarantor loan, both you and your guarantor will need to complete a credit and affordability check. The lender assesses whether you can afford the repayments and whether the guarantor is in a position to cover them if you cannot.
Once approved, the loan is typically paid into the borrower's bank account. The borrower then makes monthly repayments as agreed. The guarantor does not need to do anything unless a payment is missed.
If a payment is missed, the lender will usually contact the borrower first. If the payment remains outstanding, the lender has the right to pursue the guarantor.
Who can be a guarantor?
Lenders set their own criteria, but most require a guarantor to:
be aged 21 or over
live in the UK
have a good credit history
have a stable income
Lenders may also require the guarantor to be a homeowner, though some will accept non-homeowners with a strong enough financial profile.
You can be financially connected to the borrower, for example as a partner or family member with a joint account.
Most lenders will require you to also have your own separate bank account.
Check the specific lender's requirements before applying, as criteria vary.
What are the risks of being a guarantor?
Being asked to act as a guarantor is a significant decision. Before agreeing, it's important to understand what you are legally committing to.
Full financial liability
If the borrower stops paying, the lender can pursue you for the full outstanding balance, including any interest and fees. If you cannot pay, the lender can take legal action. In serious cases, a court can issue a charging order against your property, which means the lender could recover the debt when your home is sold.
Impact on your credit score
According to Experian, becoming a guarantor does not normally appear on your credit report by itself, but if you have to cover any of the repayments, this will show on your credit report. If you then fail to repay the money owed, your credit rating would be affected. This could affect your ability to get a mortgage or other credit in the future.
Relationship strain
If the borrower cannot or will not make their repayments, the financial pressure falls on you. This can put real strain on friendships and family relationships, and it is something to think carefully about before agreeing.
Limited exit
Once you sign as a guarantor, it is very difficult to leave the agreement before the loan is repaid in full. You generally cannot withdraw because your circumstances change. This is a long-term commitment.
Are guarantor loans still available in the UK?
The number of lenders offering guarantor loans in the UK has reduced significantly in recent years. Several providers left the market following increased regulatory scrutiny from the Financial Conduct Authority.
Amigo Loans, which was one of the largest guarantor loan providers in the UK, was publicly censured by the FCA for failing to carry out adequate affordability checks and stopped offering new loans in 2023.
While the landscape has changed considerably over the years, they are still available in the UK.
What are the alternatives if I cannot find a guarantor?
If a guarantor loan is not the right option, there are other routes worth exploring.
Loans for bad credit are available from some lenders without requiring a guarantor. Eligibility is based on your own circumstances rather than someone else's credit profile.
No guarantor loans for bad credit are marketed specifically towards people who cannot or do not want to involve someone else in their application.
Credit unions are member-owned financial organisations that often offer loans with more flexible criteria than high street lenders.
Building your credit score over time can open up more borrowing options.
For a broader overview of how personal lending works, see our guide to how loans work.
FAQs
This blog is for informational purposes only and does not constitute financial advice. Please speak to a qualified financial adviser before making financial decisions.
