What is a guarantor loan?
With a guarantor loan, someone else promises to pay back what’s left on your loan if you find that you can’t make the repayments yourself.
Before the internet, when most lending was still done by banks, it was considered perfectly normal for a bank manager to ask a borrower to find someone to guarantee the loan repayments, especially with mortgage applications (source).
However, in recent years, unsecured guarantor loans have made a comeback because lenders want to be able to approve loan applications from borrowers with no credit history or a poor credit rating. Previously, their lending guidelines meant that they would have had to say “no” to these borrowers but, with a guarantor, they’re now able to say “yes” in many cases.
Growing Power works with a panel of established and reputable Financial Conduct Authority (FCA)-authorised and regulated loan firms offering guarantor loans which are not secured on either your property or anything else you own.
What you need to know about guarantor loans
- Q1 - What are the advantages of a guarantor loan?
- Q2 - What are the disadvantages of a guarantor loan?
- Q3 - Who can be my loan guarantor?
- Q4 - Who makes the best loan guarantor?
- Q5 - Finding the best guarantor loan
- Q6 - How fast is a guarantor loan paid out?
- Q7 - Will being a guarantor affect my credit score?
- Q8 - Credit checks and guarantor loans
- Q9 - Can I get approval for a guarantor loan before I apply?
- Q10 - Are guarantor loans really safe?
- Q11 - I want to nominate a guarantor who is retired. Is that OK?
What are the advantages of a guarantor loan?
The biggest advantage of guarantor loans is that, depending on your circumstances, borrowers with no credit history or a poor credit rating now have a chance to access to the finance they need when they would have been refused a loan elsewhere.
At Growing Power, we believe in financial inclusion. For borrowers with bad credit histories who approach us for help, we’re often able to find them a competitive and affordable loan offer when they’ve had no success applying for a “no guarantor loan”.
You may be able to borrow as little as £100 and up to £10,000 choosing a repayment period of between 3 months and 5 years.
Please note that if your guarantor loan is for less than £1,000, then you have a choice of repaying the loan over 3 months, 6 months, or 12 months. Please remember that the longer you choose to pay your loan back over, the more you will pay in interest.
What are the disadvantages of a guarantor loan?
If you can’t keep up repayments on your guarantor loan, then your guarantor must repay the balance. This doesn’t mean that they must pay everything that’s outstanding all at once though – all they have to do is to keep to the schedule of repayments you agreed with your lender, in most cases.
You must make sure that your guarantor is fully aware of what they are signing up to and that they read, understand, and agree to the terms and conditions of the loan. Your loan provider will also satisfy themselves that the guarantor completely understands exactly what they are agreeing to.
Please be aware that, if you do miss any repayment, then your guarantor’s credit score might suffer as well as yours. If your guarantor also fails to make any overdue repayments, then their credit file (as well as yours) may also be impacted. Failure by yourself and your guarantor to make repayments may also result in the account being passed to a debt collection agency and/or court action by the lender against you and your guarantor.
Who can be my loan guarantor?
Different loan companies have different requirements on the types of person you can introduce as your guarantor. According to Your Money, a good rule of thumb is that your guarantor should:
- be 21 years of age or older,
- have a good credit history,
- hold a UK bank account,
- be a homeowner,
- and be in employment.
You’re also not allowed to nominate your spouse or civil partner to be your guarantor. In fact, you can’t nominate anyone that you have a “financial link or association” to – read more about what this means at CheckMyFile.
Many of the lenders on our panel are happy to work with guarantors who do not own their own homes. When you apply through Growing Power, we can put you in touch with them.
Who makes the best loan guarantor?
Most guarantors are friends or family members – people who trust you and people whom you trust.
Finding the best guarantor loan
Finding the best guarantor loan is all about finding a lender who really understands you and your current financial and personal situation.
Guarantor loan companies appreciate that every borrower has their own financial and personal situations which are completely unique to them. It’s this understanding about their borrowers which explains why many lenders are happy to work with applicants who have a bad credit history.
In addition, because lenders have that extra security of a guarantor, they can better focus on providing a competitive and affordable loan for you.
This approach means that, in many cases, the interest rates on guarantor loans are lower than you’d find on a payday loan.
Please be aware though that, depending on your financial circumstances and your guarantor’s financial circumstances, you may be offered a loan at a higher APR than the representative APR shown on this page or at a higher rate than other types of finance.
Navigating your way through the broad range of different lenders and their products is time-consuming. We appreciate that. So, at Growing Power, our free service is designed to help you secure a competitive and affordable guarantor loan that’s right for you, no matter what your current credit situation.
Ready for a quick loan?
How fast is a guarantor loan paid out?
Growing Power and many of the companies on our panel of lenders understand that, sometimes, you need money as quickly as possible to help you cope with an unexpected expense. With that in mind, we’ve built our system to make sure that the loan you want is paid into your bank account as quickly as possible.
Smaller guarantor loans may be paid directly into your bank account within hours* (depending on your bank and the type of account you have). Larger guarantor loans may be paid within a few days. “No guarantor loans” may be paid out quicker than guarantor loans and there is a full range of no guarantor loans for bad credit applicants available via the Growing Power website.
Will being a guarantor affect my credit score?
There will be no negative effect on your credit score or your guarantor’s credit score, unless you or your guarantor miss any repayments. Any repayments missed may appear on your and your guarantor’s credit file.
Credit checks and guarantor loans – will we both be credit checked?
Some lenders will run a full credit check on both you and your guarantor when you complete your online application for the loan you want. Other lenders will run a soft credit check on you and a full credit search on your guarantor. You will be advised on a guarantor lender’s specific policy on credit searching prior to completing your application.
Please also note that you or your guarantor must not have been declared bankrupt or be subject to an IVA. If either of these were true then your application would, unfortunately, not be accepted.
Can I get approval for a guarantor loan before I apply?
No – unfortunately not. All FCA-authorised and regulated guarantor lenders must carry out a credit check and an affordability assessment before they can offer you a loan.
Are guarantor loans really safe?
Yes. All loans provided by Growing Power’s panel of FCA-authorised and regulated lenders are safe and transparent. Your lender provides you with all the important information you need before you make a decision to go ahead or not.
I want to nominate a guarantor who is retired. Is that OK?
Yes. You can nominate a guarantor who is retired – that is OK – but they should be under the age of 75 with a good credit history. If a retired guarantor is a homeowner, this may increase your chances of being accepted.
Final things to consider about guarantor loans
You should not take out a guarantor loan if you are not certain that you can meet every repayment on time and in full. You should also not take out a guarantor loan if making the repayments would cause you or your family hardship.
If you are struggling to meet your monthly commitments, you may wish to consider approaching one of the following six debt organisations for free advice and support – StepChange, PayPlan, National Debtline, the Debt Advice Foundation, the Money Advice Service, and Citizens Advice.
For our help in finding the very best guarantor loan deal available from the companies on our panel of lenders, use the free Growing Power service. We don’t charge a penny for our service and there’s no obligation on you to take out any loan we find for you.
Our lenders carry out a soft credit search on you as part of the application process – these searches are only visible to you on your credit report to you and they won’t affect your credit score.
We then transfer you automatically to the website of a guarantor lender on our panel likely to offer you a loan based on the information you’ve provided us with. They will ask you to answer a few more questions at this point. If you decide to proceed, your potential guarantor lender sends you information on how to invite the potential guarantor you have in mind to help you apply for the loan.
Once you send that information to the guarantor, then your guarantor will be sent a link to the lender’s website. At this point, the lender will show your guarantor the size of the loan you want, the length of the repayment period, and the size of each repayment. Your guarantor will then either accept or decline the invitation.
If they are happy to become your guarantor, they’ll have to fill in an application form on the lender’s website. Once they’ve completed the form, your lender will then run a full credit search on your guarantor (and, if applicable, you).
The lender will either make you a firm offer for your guarantor loan or they will turn down your application.
If your lender does make you an offer, you and your guarantor will be shown all the information you both need in order to make up your minds on whether this is the right loan for you and your guarantor. You will both need to read and agree to the terms and conditions of the loan before your lender transfers the money into your personal bank account.