How Important is the Role of the Guarantor?

The importance of the role played by the guarantor in the granting of a guarantor loan application cannot be overstated. It is a simple fact that for many people, without having a guarantor to co-sign the loan agreement, the realistic and affordable credit options available to them would be limited at best.

For many people the ability to access credit through a guarantor loan is the only means of credit available to them and this inevitably leads to a question that must be answered right at the very start of the process. Who should I ask to be my loan guarantor?

The concept of the guarantor loan was created to allow potential borrowers who have a poor (or no) credit rating the opportunity to successfully apply for a new line of credit which is available without an astronomical APR (Annual Percentage Rate). To help minimize the risk to the lender of lending money to someone who has had difficulty maintaining repayments in the past, they will insist on someone acting in the role of a loan guarantor for the borrower who will be obliged to repay the loan if the borrower fails to make repayments.

Who Should I ask to be my Loan Guarantor?

Due to the importance of the role of the loan guarantor, it would be sensible to ask someone with whom you share a great degree of mutual trust. So long as the person you ask is not financially linked to the applicant such as a spouse or partner residing in the same property, there are no boundaries to who you can ask to fulfil this role.

Family members, close friends, even work colleagues and landlords have all been popular choices to act in the role of loan guarantor for many people but the choice though will be yours.

It is crucial though that whoever you ask fully understands the role that they may potentially have to play. If you (the borrower) fail to keep up with the loan repayments, it is the guarantor who will be legally obliged to take over the repayments.

What requirements should the Loan Guarantor fulfil?

The lender will need the loan guarantor to fulfil a number of requirements if they are to ensure eligibility for the role. These include:

• It is essential for the loan guarantor to be a homeowner
• Be in receipt of regular income
• Have a good personal credit history
• Not be financially dependent on the applicant

We are often asked ‘if a guarantor loan is unsecured, why it is essential for the loan guarantor to be a home owner?’ The simple reason for this is traceability.

Lenders insist that that any loan guarantor must be a homeowner so that if the borrower defaults on payments, it is much easier to trace the guarantor if they own their own home.

Check out the following link to see what Solution Loans have to say about loans with a guarantor -

What happens if the applicant defaults on a payment?

Generally, if a borrower defaults on any of their loan repayments, the lenders will allow a short period of time in which they can make up the arrears. If this does not happen, the lender will contact the guarantor in order to request payment on behalf of the borrower.

If both the borrower and guarantor consistently fail to make the required repayments, this will lead to defaults and even County Court Judgements (CCJs) on the credit file of both the applicant and loan guarantor.

For more information relating to CCJs please visit -

Benefits of a Guarantor Loan

The steps detailed above are obviously the worst case scenario and if the borrower keeps up with the repayments as scheduled, this has the ability to have an extremely positive effective on their credit rating.

For this reason, applications are occasionally received from people who have no credit history and who are looking to build a good credit record.

If everything works as intended, the role of the loan guarantor will never need to be more than co-signing the agreement.

For more information relating to the UK bad credit loan market, please check out