What is a Guarantor Loan?

This 60 second video explains how guarantor loans work, why they’re helpful and how to get one through Solution Loans:

A guarantor loan is a type of personal loan. It is an unsecured loan, meaning you don’t have to provide an asset like your home, car, or jewellery as security against it.

The interest rate you pay for a personal loan is determined largely by your credit rating and your personal circumstances. But the rate for a guarantor loan is much less dependent on these things because you provide a guarantor.

A poor credit score is likely to make it much harder to get a personal loan from a high street lender.  To avoid this problem a guarantor loan could be your answer. It can help you borrow even if you have got a bad credit history.

What makes a guarantor loan different?

With a guarantor, you should be able to get an unsecured loan with a much more affordable interest rate.

A guarantor loan breaks the link between your bad credit history and your good credit future. In exchange for providing a guarantor, which reduces the lender’s risk, you should be able to get unsecured credit at a lower interest rate.

Once you have your loan it can help you to rebuild your credit rating – just make sure you make your monthly repayments on time and in full. 

a mother (the guarantor) with her son (the borrower)

How do I get a guarantor loan?

Follow these steps to get your guarantor loan:

  1. Decide who will be your guarantor – you need to take advantage of your social network. Find a family member or close friend who knows you well, trusts you and will support your application. They don’t have to own their home.
  2. Use Solution Loans to find your lender optionsour search service won’t cost you anything, but will save you lots of time. And you may end up with 3 or 4 loan options to choose from as we work with lots of guarantor loan lenders. Compare the lenders’ representative APRs and also the total repayment amount.
  3. Choose your lender – once you’ve compared the guarantor loan options it’s time to choose the lender and complete your loan application. You can do this directly from our thank you page. You don’t need to know exactly who your guarantor is at this stage, but if you do it will speed things up.
  4. Your lender approves your application – once your guarantor has been approved and both you and your guarantor have signed the loan documents it’s time to get your loan. It is perfectly possible to get your loan within 24 hours of approval.

How to find a guarantor

Obviously finding a guarantor is the key to unlocking this loan opportunity. If you don’t think you can find a guarantor you may be surprised to hear that over 500,000 have or have had a guarantor loan. If they can find guarantors then so can you.

So, who is the perfect guarantor?

  • Aged 18 to 70 (exact age limits vary by lender)
  • They know you well and trust you – e.g. family member, close friend or co-worker. But they can’t be financially linked to you, so your spouse can’t be your guarantor.
  • They have a good credit rating
  • They meet minimum income requirements (vary by lender), but their income does not have to come from employment. They could for instance be retired and drawing their pension or have investment income.
  • Homeowners are the best choice, but more and more lenders are happy to accept non-homeowner guarantors although you may not be able to borrow as much or get the lowest rate.

We’d recommend that you start with a broad list of names and then narrow it down to a short list. Have one or two reserves in case your first choice is not accepted by your lender. Lenders are likely to have different criteria. Also make sure that your guarantor is fully aware of their responsibility by showing them this guide and that they really are happy to do it.

More questions? They may already be answered in our detailed FAQ section.

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