Guarantor Loans

Cara Bradley

Written by

Cara Bradley

4 min read

Updated: 23/02/2024

If you have a low credit score and feel you could find it difficult to be approved for a loan, you might be looking for information about guarantor loans.

What is a guarantor loan?

A guarantor loan is when a lender agrees to lend a sum of money to you with somebody else acting as your ‘guarantor.’ While you should be confident that you’ll be able to make your repayments on time every month, if the unexpected happens and your circumstances change, your guarantor will be expected to step in and make your repayment(s) for you.

Can I get a guarantor loan with bad credit or no credit history at all?

Guarantor loans have the potential to provide credit access to those who may otherwise struggle to get approved for a loan due to bad or no credit history.

Guarantor loans could also be an option for those with thin credit files.
Having no credit history is sometimes referred to as having a ‘thin’ credit file. This could affect your chance of being approved for a loan, as lenders have no indication of how you have managed credit in the past.

Who can I ask to be my guarantor?

Whoever you choose to be your guarantor they should meet the eligibility criteria.
Each lender will have their own requirements but, typically, guarantors must:

  • Be over the age of 21;
  • Be a UK resident with a UK address;
  • Have a UK bank account with a valid debit card;
  • Be in employment with a regular wage paid directly into their bank account; and
  • Have good credit history.

Being a homeowner is sometimes an additional condition, but this varies between lenders.

Typically, people tend to ask family members or close friends to be their guarantor.
It’s important to have a trusting relationship with the person you ask. Talking openly about money can be difficult, but you are going to need to be transparent with one another throughout the entire process.
It’s imperative that both you and your guarantor understand the potential risks associated with guarantor loans.

How exactly do guarantor loans work?

While the process may vary between lenders you can expect the guarantor loan procedure to look something like this:

  1. Choose your ideal loan amount and term and select the person you’d like to be your guarantor.
  2. Both you and your chosen guarantor will be required to undergo checks, including a hard credit search.
  3. If the lender is happy with the results of their checks, you will be sent a loan agreement. Be sure that you both read this thoroughly before deciding whether to accept the loan offer.
  4. Pay back your loan in monthly instalments before the term ends. If you fall behind on or fail to make your repayments, it will be your guarantor’s responsibility to step in and cover the cost.

Can a guarantor loan affect the credit rating of my chosen guarantor?

If you default on your repayments, your guarantor will be expected to step in.
If they also fall behind on or miss repayments, their credit score is likely to suffer.

When you and your guarantor enter into a loan agreement together, the credit reference agencies may consider you both to be financially associated.
Being financially associated with someone who has poor credit could have a negative impact on your guarantor’s own score.

Remember, if someone asks you to act as a guarantor for them you are under no obligation to say ‘yes’ if you don’t feel comfortable. It’s worth noting that once you have signed the loan agreement, you will usually have a cooling off period, during which time you can change your mind. Once the cooling period is over, you will be expected to be committed to the agreement.

How can I search for a guarantor loan with Viva Money?

Viva Money is a credit broker authorised and regulated by the Financial Conduct Authority (FCA). We work with a panel of trusted lenders who offer loans between £100 and £10,000 with repayment terms from 3 to 60 months, depending on how much you borrow.

Some of the lenders on the Viva Money panel specialise in loans for those with bad credit. When you search for a loan with Viva Money, we may be able to match you to a guarantor loan.

You can begin searching for a loan with Viva Money by clicking here. Our online application form should take no longer than 5 minutes to complete. We use soft search technology to gain an insight into your financial history without leaving a mark on your credit file or affecting your credit score.

I’m worried about money. What can I do?

If you’re struggling to manage the repayments on your loan, you must contact your lender as soon as you can.
There may be things they can do to help ease the pressure.

Free, impartial advice can be found on sites including Citizens Advice, National Debtline, and MoneyHelper.

Viva Money is proud to have teamed up with charity StepChange to provide a free, online quiz. The answers you provide will help you understand the steps you can take towards regaining control over your finances.
Taking the quiz will not affect your credit score and the answers you provide are confidential.