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Guarantor Requirements - Who Can Be A Guarantor?
If you’ve been asked to be a guarantor or provide one for a loan, we’re here to help you understand the ins and outs of what that means.
In this article
Ais a type of unsecured loan. That means you’re not using something like your car or your home as collateral in case you can’t make the repayments.
Instead, the lender asks you to provide a guarantor.
For the guarantor
The main takeaway is that being a guarantor isn’t a risk-free option. You should make sure you’re confident that the person borrowing the money can and will make repayments and that you can comfortably do the same if you need to.
For the borrower
Make sure you ask someone you trust becauseis a big commitment for both of you. It’s a good idea to avoid borrowing more than you can afford because the guarantor should only have to pay as a last resort.
Maybe a friend or relative has recently asked you to be a guarantor so they can get a loan, but you’re not sure what this could mean for you. Let’s break down some of the basics.
What’s a guarantor?
A guarantor is someone who’s legally responsible for repaying another person’s loan if they can’t pay it themselves.
Who can be a guarantor?
Anyone can be a guarantor if they’re over 21. Usually, someone will choose a relative, but they could also choose a friend to be their guarantor. It’s important to only be a guarantor for someone you trust, because you’ll need to repay their loan if they can’t or don’t.
What does being a guarantor involve?
If you’re asked to be a guarantor, you’ll need to meet the lender’s criteria. That will mean things like having a, being over 21 years old and being financially stable. There are some risks to consider before accepting because you’ll be responsible for the loan if the borrower can’t or doesn’t make repayments.
What are the risks of being a guarantor?
If the borrower can’t or doesn’t make the loan repayments, you would be responsible for it and anyit accrues. That means you risk losing money or anything you’ve secured against the loan (like a car or house).
If the loan becomes your responsibility, it will also show on yourand history.
It may also impact your chances of getting a loan or mortgage because a lender will look at your full credit history and assess what your expenses are.
What does a guarantor need to provide?
If you accept and become a guarantor, the lender needs to make sure you can make the repayments if needed. So, they might ask for proof of income or that you have enough assets to cover the full loan amount (like a car or house).
If you’re looking for a loan and the lender’s asked you to provide a guarantor, you might be wondering why.
Why you might be asked to provide a guarantor
If you have bad credit, or, lenders might ask you to provide a guarantor. It’s so they can ensure someone will be able to afford repayments if you can’t.
What to do if you can’t get a guarantor
If you can’t get a guarantor for your loan, you might want to look ator . In the meantime, you can keep an eye on your credit score and report, for free, by signing up to ClearScore.
Can being a guarantor cost money?
Yes – if the borrower doesn’t make repayments. If that happens, the guarantor will need to pay instead.
Will being a guarantor show on my credit report?
Only if the borrower doesn’t make repayments. In that scenario, the loan would become your responsibility and show on your credit report.
Does being a guarantor affect my credit rating?
Only if the borrower doesn’t make repayments and you become responsible for the loan. It would then be one of the factors that make up your credit score.
Can being a guarantor can affect a mortgage application?
Yes – if you become responsible for the loan. That’s because it shows on your credit report as an expense and could impact your credit score if you fail to make repayments. It’s one of the things a lender will consider when deciding to give you a mortgage.
What’s a guarantor check?
A lender might perform aon the guarantor’s credit history to make sure they can afford to make the repayments if the borrower can’t.
How much money do you need to have to be a guarantor?
A guarantor doesn’t need a certain amount of money, they just need to be able to afford to make the repayments if the borrower can’t.
How long does a guarantor agreement last?
Guarantor loans can be up to five years long and once a guarantor is added, you can’t remove them until the loan is repaid.
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Helen's our resident Digital Copywriter. She makes personal finance easier to understand so you can be confident about your credit choices.