The comprehensive guide to Guarantor loans


This guide is designed to explain our Guarantor loans, including what they are and how to find a Guarantor. While most Guarantor loans have the same basic principles, each provider will have slightly different criteria so the information in the guide will only be accurate for UK Credit Guarantor loans.

What is a Guarantor loan?

A Guarantor loan is a type of unsecured personal loan. The difference between Guarantor loans and other types of unsecured loans is that the Borrower has the support of a Guarantor who agrees to step in and make the monthly repayments if the Borrower does not.
Our Guarantor loans can be accessed by those who have a less than perfect credit rating, or have not built up a strong credit history, and therefore may not be approved for credit from other providers such as high street banks.
The loan itself can be used for a wide variety of reasons, but are most commonly used for consolidating other debt, home improvements, buying or repairing a car or motorbike and weddings.

  • Guarantor loans are unsecured, meaning that neither the Borrower’s nor Guarantor’s home is at risk
  • Guarantor loans require someone close to the Borrower to agree to act as a Guarantor and understand the responsibilities and risks this entails
  • Guarantor loans do not require the Borrower to have a strong credit rating but do require them to show they can afford the repayments
  • Repayment periods are variable, so the Borrower should consider how much they can afford to repay each month

Being a Guarantor

A Guarantor is someone close to the Borrower, such as a family member, partner, a close friend or work colleague, who agrees to support the loan of someone they trust.

Guarantors are needed to provide security for the Borrower in order to obtain the loan, and, if the loan repayments are missed, they agree to step in and make the payments on the Borrower’s behalf.

The role of a Guarantor shouldn’t be entered into lightly. Visit our guide to find out more about the responsibilities of being a Guarantor.
A Guarantor will be:

  1. Reliable: They will be willing and able to make the payments if the Borrower does not.
  2. Good with money: To be accepted, the Guarantor must have a fair to good credit history, be a homeowner and have a regular, stable income.
  3. Open: They will need to disclose information to the loan provider about their financial history, including whether they have been in a Debt Management Plan, Individual Voluntary Arrangement, subject to a Trust Deed or been declared Bankrupt.
  4. Understanding: The Borrower will need to be very open with their Guarantor, explaining why they need a loan and why they wouldn’t be able to take one out without some support.

Who can be a Guarantor?

There are several criteria that Guarantors must meet to be eligible for a UK Credit loan.

Guarantors can be:

  • Parents
  • Friends
  • Brothers or Sisters
  • Other family members
  • Colleagues

Guarantors must be aged between 25 at the start of the loan and 70 years old at the end of the loan term.

Employment status
Guarantors must be employed, retired or in receipt of certain benefits.

The Guarantor must be a UK resident living in England, Scotland or Wales.

The Guarantor must be a homeowner, either outright or with a mortgage.

Your UK Credit loan

We base our decisions on the affordability of the loan and your individual circumstances.

For successful applications, we aim to pay out the loan funds within 48 hours. However, several factors can affect this. If documents are requested from you, sending them promptly means we can review them and continue the application process. Another factor is when both the Guarantor and Borrower are available for a telephone call. All applications are different and treated independently.

Does financial history affect the application?
The Borrower’s personal financial history can affect the application. For example, if they have been declared bankrupt, are currently in a Debt Management Plan (DMP) or an Individual Voluntary Agreement (IVA) or subject to a Trust Deed, we will not be able to help.
We also consider the financial history of the Guarantor to make sure that they can afford the repayments if required to make them.

Full disclosure
It is important that the Guarantor understands the Borrower’s financial history before agreeing to act as Guarantor. During our application process, we will discuss the Borrower’s details including but not limited to, the Borrower’s payment history, current credit commitments, disposable income and loan purpose with the Guarantor. This ensures the Guarantor understands the likelihood of them being called upon to take over the repayments, should the Borrower not make them.

Top up loans
Financial situations can change, so many Guarantor loan providers allow loan top-ups. With UK Credit, if the Borrower requires additional funds and have made their last twelve months of repayments in full and on time, then they may be eligible to top-up their loan.

Early repayment
If the Borrower wishes to settle a loan balance, they can request a loan settlement figure. By settling a loan early, the Borrower could reduce the amount that they need to repay in the long term.

Early settlement interest will be applied – usually around the same amount as two months’ interest. This will be added to the remaining loan balance and included in the settlement figure.

APR explained

Annual Percentage Rate (APR) shows how much borrowing will cost over the course of a yearly period. It includes the interest rate and any additional fees. The amount is shown as a percentage of the outstanding loan amount. Comparing the APRs of different loan providers is a good way for Borrowers to clearly understand the overall repayment figure. The APR is calculated using a formula as set out in the Consumer Credit Act 1974, – every lender must follow it.
At UK Credit, because we only accept applications when both the Borrower and the Guarantor are homeowners, we can offer Guarantor loan rates between 24.9% – 39.9% APR.

Fixed vs variable APR?
When an APR is a fixed rate, this means the rate of interest charged will not change throughout the period of the loan agreement. A variable-rate APR reflects a monthly payment that could change, dependant on national rates and economic changes.

The benefit of a fixed APR is that a Borrower will know exactly how much they need to repay every month. A loan with a variable interest rate means that the monthly payment amount could change during the loan term.

What happens if you can’t pay back your Guarantor loan
If you are struggling financially, don’t panic. Contact us as soon as possible. We will always try to work with you to resolve the situation. For more information go to our payment help page