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What Is A Guarantor Loan?

A guarantor loan can be used by a person that wants to borrow money but would otherwise not be eligible for a personal loan due to their lack of credit history or a poor credit profile. When taking out a guarantor loan, the borrower will need a guarantor who will be responsible for any payments on the loan should the borrower default. A guarantor will often be a family member or perhaps a close friend that is to be willing to take on the risks involved with a guarantor loan.

Am I Eligible For Guarantor Loans?

Working out whether you will be accepted for a guarantor loan is easy when you use Choose Wisely’s “get accepted” tool. To check now, click the button on this page. By doing this, you will be able to see which lenders may be prepared to lend to you without a “hard search” on your credit report. Please note however that when the time comes to complete the full application a hard search will be performed on the loan guarantor’s credit report to check their credit history as well as either a soft search of hard search on the borrower’s.

What Are The Advantages Of Guarantor Loans?

Guarantor loans are useful for people who need a loan but who either have bad credit or very little in their credit history. They are also one way for people to improve their credit score by making all repayments on time, although there are a number of other ways to build up your credit score too. One of the key benefits is that having a loan guarantor effectively lowers the risk for the lender which subsequently results in having a lower interest rate when compared to other types of loans for people with bad credit. However, that is not to say that interest rates are low, because they are substantially higher than a mainstream personal loan, which means that you will pay back more overall and your monthly repayments will be higher compared to someone with good credit who borrows the same amount.

What Are The Disadvantages Of Guarantor Loans?

As mentioned above, the interest on a guarantor loan is a lot higher than a mainstream loan. The other main disadvantage is that you are asking a family member or friend to place a lot of trust in you, potentially even risking their own financial stability should you default on the loan. Should this happen it is likely to cause issues between yourself and the guarantor. You should think carefully about this prior to going down the loan guarantors route, making sure you will be able to afford repayments yourself. You will also need to make sure that your guarantor has good credit or a good credit rating. It is likely that you will not be accepted for a guarantor loan if they also have a bad credit rating.

How Much Are The Monthly Repayments On Guarantor Loans?

Your repayment amount will depend on the amount you borrow, the length of the loan and the interest rate that is charged. The interest rate that you are charged will be determined by a number of factors including your credit history and credit score. An easy way to find out how much you are likely to pay is to go through Choose Wisely’s “get accepted” journey, which you can find using any of the buttons on this page.

Are Guarantor Loans Regulated By The Financial Conduct Authority (FCA)?

Although we cannot speak for others in the market, all guarantor loans that you will be shown when you go through Choose Wisely’s “get accepted” process are provided by lenders who are regulated by the Financial Conduct Authority.

How Can I Compare Guarantor Loans?

We have partnered with Choose Wisely, to being you their guarantor loan comparison service. As well as being able to compare loans for different lenders, you can also see whether you are likely to be accepted prior to completing a full application. This is useful because it does not affect your credit score. Click the compare button on this page to get started.

Written By Michael Foote, Insurance and Finance Expert

Michael Foote is the founder of Quote Goat and has over 13 years experience working in the finance, insurance and currency sectors. Since launching Quote Goat he has appeared on TV as well as many of the largest online publications including Forbes, The Telegraph and The Metro. Prior to Quote Goat, he worked in finance in the city for a number of firms including HSBC.