To act as someone’s loan guarantor is a great thing to do but it comes with risks that you need to be aware of.
Someone who is borrowing this way is doing so because it has proven impossible for them to get a more regular personal loan. This isn’t to say that they are a big risk. It’s just that lenders such as banks, building societies and even supermarkets have become very risk averse in recent years. Even a modest blemish on someone’s credit history can be too much for a bank to swallow. But equally if the borrower is young and has no credit history the same problem will exist.
Guarantor loans may sound like a loan of last resort but this is far from the truth. We estimate that over 500,000 people have or have had a guarantor loan. These loans have become a mainstream credit option and all the lenders we work with are fully regulated by the FCA. All our lenders are obliged to lend responsibly and ensure repayments are affordable.
This short video explains how these unsecured loans with a guarantor work. If you have more questions there’s also a FAQ for guarantors.
We’ve asked the borrower to make sure that their guarantor (you!) understands what their role is. In the situation where the borrower makes repayments on time and clears the debt then you may not be involved at all. But if the borrower has problems then your role is to step in and help them out. You will need to make the payments until the borrower can do so.
Obviously this is not a responsibility to take lightly. Equally our lenders won’t let someone take on this role unless they believe they could afford to.
If you are asked to be someone’s guarantor take time to consider if you should. What questions might you want to ask yourself?
If you can answer each of these questions to your satisfaction then by all means be their guarantor.
We’ve suggested to the borrower that they draw up a short list of possible guarantors. Different lenders have different criteria for guarantors. One guarantor might suit one lender but not another. You may be asking yourself if you are a suitable guarantor. Here’s some general guidance:
You don’t need to own your home to be someone’s guarantor. Your home is not used as security and in fact more and more lenders are very happy to have non homeowner guarantors.
If you’re wondering how acting as a guarantor might affect your credit rating then watch this short video for the answers:
Regulation requires that lenders treat guarantors in a reasonable manner. And no lender would do otherwise. With this in mind our lenders are committed to: