guarantor loans

Guarantor Loans Definition and How to Find a Guarantor Loan

  – Guarantor Loans – 

Do you have a poor credit score record but would love to get a loan? That is possible with the option of getting guarantors loans. 

guarantor loan

Some lenders do not give loans until another person comes to guarantee to pay if the borrower doesn’t pay up.  

This article contains everything you need to know about a guarantor’s loan and places to get loans from.  

Guarantor Loans Overview

Some lenders will only provide a loan to borrowers if another person (for example, a friend or relative) guarantees to make the payments if the borrower doesn’t. The other person is known as a guarantor. 

If you’re struggling to get a loan, guarantor loans offer an opportunity to borrow, with the help of a guarantor. A family member or friend ‘guarantees’ to cover your payments if you can’t.

Guaranteed loans can be a good option if you’re starting out and don’t have a credit history.

Or, you may have a poor track record when it comes to managing your credit, with missed credit repayments, defaults on an account, or too many credit applications.

One of the benefits of a guarantor loan is that they give you a chance to build a good credit score, providing you keep up with your repayments.

How do Guarantor Loans Work?

Guarantor loans work in the same way as any loan, you borrow money from the lender, and then pay it back in monthly installments.

The only difference is that a third party, your ‘guarantor’ is part of the agreement – having guaranteed to make your payments if you can’t.

Depending on the lender, the guarantor will sometimes initially receive the loan. At this stage, they can decide whether to give it to the borrower, or give it back to the lender within the two-week ‘cooling-off period’.

Providing the guarantor is happy with the agreement, you (the borrower) will receive a lump sum. You’ll have to pay it back per the terms of your loan (usually between one and seven years).

How it Work in Details

  • Find a guarantor and apply: You’ll need an agreement from the guarantor (friend or family member). Both you and the guarantor complete the loan application and sign
  • Loan agreed: The terms of the loan, including your interest rate, the term of the loan, and the amount borrowed are all confirmed
  • Funds paid out: Money is paid out to you or your guarantor, depending on the provider’s terms. The guarantor may have to pass the funds on to you
  • Loan repaid in installments: Monthly repayments of the loan and interest begin immediately. If you hit difficulties the loan provider will require repayments from your guarantor

How Much Can I Borrow?

The amount you’ll be able to borrow depends on your financial circumstances. Your debts and credit history will be taken into account, as well those of your guarantor, to ensure both you and the guarantor have the ability to pay off the debt.

Guarantor loans are a way for lenders to mitigate their risk and each provider’s lending criteria will differ.

Remember the provider may offer you less than you request, should they consider you to be a risky borrower, even with the addition of a guarantor.

The Pros of Guarantor Loans

1. There’s a Higher Chance of a Successful Application

Having a guarantor is added security for the lender, so there’s a stronger chance your application will be accepted.

2. You could Borrow More

Having the backing of a guarantor gives the lender extra peace of mind, so they’re more likely to lend you a larger amount.

3. It’s Good for Those with Poor or Little or no Credit History

A guarantor loan allows those with poor credit history to add security to their repayments and so is a great option for those with bad credit.

It’s also commonly used for those with little or no credit history, such as young adults buying their first home.

4. It could Boost your Credit Rating

Whenever you manage credit well, it should reflect in your credit rating.

Making guarantor loan repayments in full and on time could go some way to repairing a poor credit history.

Many lenders also offer you the option of making overpayments or repaying your loan early without additional charges, which gives you the option of reducing your loan term and total repayment cost.

The Cons of Guarantor Loans

Here’s the bad side you need to know before you both sign to get a guarantor loan. 

1. You’ll need to Spill your Financial Situation

Talking to those close to us about money problems can often make for uncomfortable conversations.

You may not want to admit to those around you that you’ve had problems with credit in the past or that you’re struggling to get the loan you need.

For someone to agree to be your guarantor you’ll need to have a frank and honest discussion with them about your financial situation and if they agree to be your guarantor, they’d need to be quite open about theirs.

2. Interest Rates aren’t Low

Interest rates on guarantor loans are typically higher than standard personal loans which means this type of borrowing isn’t cheap.

And remember, you’re not guaranteed the headline rate advertised on any loan. If accepted, you could be offered a higher rate.

3. Credit Ratings can be Affected

If you fail to make payments regularly and on time, your guarantor will be asked to step in.

Both you and your guarantor could have negative marks made against your credit reports, which would have a negative impact on your credit scores, although it won’t usually affect your guarantor’s rating unless they too default on payments.

4. You could Burn Bridges

Finding someone who is willing to be your guarantor may take a little time and the process could ruffle a few feathers among your friends and relatives.

If for any reason you default on payments it would leave your guarantor liable for the debt. This would more than likely put an unnecessary strain on your relationship.

You will need to place your trust in your guarantor, and they will need to place their trust in you.

Unexpected things can happen, even in the best of circumstances, so be aware of the strain and difficulties this could cause a relationship, and think about how you might handle it if things take a turn for the worse.

Who is a Guarantor Loan Suitable For?

  • Bad Credit History: If you’re seen as high risk by lenders a guarantor may mean the difference between getting a loan or not. Paying back on time can grow your credit score 
  • Limited Credit History: Young or never used credit before? A loan guaranteed by a parent or close friend may allow you to borrow, where otherwise you’d be locked out of the market
  • Over 18 and UK Resident: To apply and be accepted for most guarantor loans you’ll need to be a permanent UK resident and aged at least 18. In some cases, you may need to be 21
  • Have a Regular Income: Lenders will want to see that you have a regular, stable income – specific income requirements will vary* – and that you have a UK bank account

Who Can I Get to be My Guarantor?

guarantor loan

A guarantor, as nominated by the borrower of a loan, agrees to guarantee repayment for part or the entirety of a guarantor loan if the borrower cannot.

  1. A guarantor must pay a borrower’s debt if they default on the agreement
  2. The guarantor commits their assets (money) to repay the loan if the borrower is unable

Choose someone you trust. The person you ask to be your guarantor needs to be someone you’re happy to openly discuss your finances with.

That’s most likely to be a family member or a close friend but almost anyone can act as a guarantor: a parent, a sibling, or even a colleague.

Guarantors need a good credit history and must be over 21 years old, and they usually need to be homeowners.

As part of the application process, guarantors will need to undergo a credit check and provide bank details, proof of ID, and bank statements.

Who Can be a Guarantor for a Loan?

Almost anyone can be a guarantor, as long as they meet the lender’s requirements. But, they should be someone the borrower trusts.

Indeed, it is important that there is mutual trust between a guarantor and a borrower.

The guarantor will need to trust that the borrower will do everything in their power to make repayments on time and that they will be responsible for their finances.

On the other hand, the borrower will need to feel that they can rely on the guarantor to act on their behalf when they can’t make a repayment.

Typically a guarantor is a family member or close friend that knows the borrower well enough to understand their financial situation and trust that they will stick to a loan’s repayment schedule.

A spouse or partner can be a guarantor. Providers will want to see that you have separate finances or a bank account in this instance.

Guarantor Eligibility Criteria

  • They must be over the age of 21
  • Have a good credit history
  • Meet the lender’s minimum income requirements
  • Have a UK address
  • Be able to make repayments when the borrower cannot

How to Get a Guarantor Loan

1. Compare Loans

Using loan comparison sites, you can find our best loan deals available. By comparing loans you know what’s available in the market and ensure that you get the best deal for your needs.

2. Choose the Loan Deal you want

Pick a deal that offers you the lowest interest rate and a term long enough to afford the monthly payments, while also ensuring you don’t pay too much in interest overall.

3. Fill out an Application

Once you’ve found a deal, you can fill out a loan application form, providing your name and contact details, as well as your financial details. The lender will then assess your affordability for the loan.

Best Guarantor Medical Loans

guarantor loans

Best for Fast Application Process: Prosper Healthcare Lending

Prosper Healthcare Lending offers medical loans of up to $35,000 for select procedures. The company says it can give an application decision in as little as two minutes.

  • Eligible procedures — Medical loans from Prosper Healthcare Lending can only be used for cosmetic dental procedures, bariatric surgery, cosmetic surgery, and fertility treatments offered by partner healthcare providers. 
  • Funding time — If you’re approved for a loan, Prosper Healthcare says it typically takes one to three business days for your loan to be disbursed. (Exact timing depends on your bank.)
  • Several fees — In addition to interest and late fees, Prosper Healthcare Lending also charges origination fees. Depending on your information, the fee can be as high as 5%, and it will be deducted from your loan amount before the money is released to you.

Best if you need a Co-signer: United Medical Credit

If you don’t have great credit, United Medical Credit may allow you to add a co-signer to your loan application.

United Medical Credit isn’t a direct lender. Instead, when you submit your loan application, it shares your information with its partner healthcare lenders and attempts to connect you with a loan based on your credit profile.

  • Loan amounts — Through its lending partners, United Medical Credit offers loans ranging from $1,000 to $35,000. Loans typically have repayment terms of one to five years.
  • Fees — United Medical Credit notes that some loans charge double-digit interest rates and may have origination fees.
  • Network requirements — Most of United Medical Credit’s financing programs require you to work with a healthcare provider within its network. If your doctor isn’t within its network, they may have to enroll with United Medical Credit before your application can be processed.

Best for Multiple Treatments: CareCredit

Unlike the other financing options on this list, CareCredit isn’t a loan — it’s a credit card designed exclusively for health-related expenses.

If you need multiple treatments or want continued access to financing in case of emergencies, CareCredit is a revolving credit account that you can repeatedly borrow against when needed.

  • Introductory financing — CareCredit offers no-interest promotional periods. If you pay off the promotional purchase amount within the designated period — typically six, 12, 18 or 24 months — no interest will be charged from the purchase date. But if you don’t pay off the full balance within the specified promotional period, you’ll face interest charges on the purchase amount from the original purchase date.
  • Repayment terms — Depending on your purchase amount, repayment terms range from six to 60 months.
  • The account uses — CareCredit can be used to pay for a range of medical services for you, your loved ones, and even your pets. CareCredit is accepted by more than 225,000 healthcare providers and veterinarians nationwide.
  • APR — While CareCredit often has promotional financing options, its regular annual percentage rate can be quite high if you don’t pay off the balance within the designated promotional period — the standard cardholder APR is well into the double digits.
  • Co-signers — CareCredit allows applicants to apply with a co-signer. If approved, the co-signer will also receive a CareCredit card and be jointly responsible for charges to the account.

Best for Fast Funding: LightStream

Unlike other companies on this list so far, LightStream offers personal loans that can be used for many purposes, including medical bills.

One major benefit: You may be able to receive your money as soon as the same day you apply with LightStream. (Keep in mind the exact timing usually depends on your bank.)

LightStream offers personal loans between $5,000 and $100,000.

  • Loan experience guarantee — LightStream offers a “loan experience guarantee.” If you aren’t satisfied with your experience, contact the company, and LightStream will send you a questionnaire requesting feedback. Complete the questionnaire within 30 days of receiving your loan, and LightStream will send you $100 as soon as the company receives it.
  • Rate beat program — When you take out a loan from LightStream, you can feel fairly confident that the rate you receive is competitive. With LightStream’s “rate beat” program, the company will give you a rate that’s 0.1 percentage points lower than the rate offered by a competing lender if you meet certain requirements, including providing proof that you were approved for a lower rate.
  • Fees — LightStream loans don’t have origination fees, late fees or prepayment penalties.

Best for Large Loan Amounts: SoFi

Like LightStream, SoFi offers personal loans that can be used for a number of financial needs. SoFi offers personal loans between $5,000 and $100,000 to pay for medical or dental procedures, and you won’t have to provide personal health information or submit notes from a doctor’s appointment.

Loans have repayment terms of two to seven years.

  • Fees — SoFi loans don’t have annual fees, late fees, origination fees, or prepayment penalties.
  • Not in all states — SoFi personal loans are available in most states, but some are ineligible.
  • Loan disbursement — SoFi may take longer to fund your loan than some other lenders on our list. While some lenders offer same- or next-day funding, SoFi says it typically disburses funds in a few days.

Best Payday Loan Lenders

Best Payday Loan Lenders

Credit Loans – Best for Instant Approval

Credit Loans aims to help people get funds in the hour of need despite poor credit scores. Generally, the platform enables you to borrow as low as $250 and as much as $40,000, but individuals with low scores can only get up to $5000. 

By using Credit Loans, you can apply to multiple lenders for funds at once. This helps you avoid the exhausting process of finding and meeting with lenders individually. 

  • The process starts with filling out the basic, required form. 
  • Once you submit the form, the lenders instantly process and accessed your request available.
  • You can choose any offer you find suitable and accept it.

NB: Despite the fact you have the pre-approval on your loan request, please remember that nothing is definite until they complete formal paperwork. 

Personal Loans–Best for Bad Credit

This Utah-based company might be the best option for you if you are planning to get an installment, peer-to-peer, or bank loan urgently since the platform processes your request swiftly. 

The flexible repayment options offered by the company add to its functional versatility, which is a big plus.

You can borrow as low as $1000 and as much as $35,000 and repay the loan in up to 72 months with the typical APR that ranges from 5.99% to 35.99%. 

Also, you need to be a minimum of 18 years old, have proof of your valid citizenship, a regular source of income (with proof), and a personal checking account. 

  • You start by filling out the form that appears on the website’s home page and then submit it.
  • Soon after that, the platform forwards your request to the lenders.
  • Then, on receiving an offer by the lender, you will have the chance to either accept or decline it. 
  • If the agreement suits you, and you accept the offer, the lender might ask you to submit some more personal information to proceed. 
  • After they complete the approval process, they will provide your funds to you in up to five business days.

CashUSA – The Easiest Loans

No matter if you need $500 or $10,000, CashUSA will find someone to lend the amount to you in no time.

This U.S.-based company connects borrowers with low credit scores to lenders for free; often without a credit check.

So, despite the type of loan you are planning to get, be it a payday loan or a personal loan, one thing is for sure, you will not regret choosing CashUSA.

The eligibility criterion set by the company is not strict since the restriction of the minimum score is not imposed.

  • CashUSA demands no different information than the rest of the companies, which is your correct name and date of birth, whether or not you are active military, and other traditional contact details. 
  • Having a steady income of $1000 monthly and a personal account is a must for the approval of your request.
  • And, once your request is approved by a lender, the terms and conditions set will be made accessible to you for review.
  • For payments, all you have to do is keep the amount due in your account, and it will automatically be drawn on the decided date. 

FAQ About Guarantor Loans

What if I Can’t Make My Repayments?

If you can’t make your loan repayments, it will be your guarantor’s responsibility to ensure the debt is paid.

What if my Guarantor Can’t or Won’t make my Repayments?

If your guarantor cannot make the repayment or if they refuse to pay, the lender may take them to court for breaching their contract terms. In some cases, if the loan is secured, your guarantor’s home could be at risk.

Can your Credit Score be affected if you’re a Guarantor?

If you sign up as a guarantor on a loan, your credit score won’t be affected as long as you make the defaulted repayments on time if and when you have to.

But if you don’t keep up with the repayments then this will impact your credit report.

Do Guarantor Loans have Higher Interest Rates?

As guarantor loans are generally intended for people with poor or limited credit, you’ll find that they have higher interest rates than standard loans.

However, the actual rate you get will depend on other factors including the amount you’re borrowing and over how long.

Can I Get a Guarantor Loan with Bad Credit?

You can get a guarantor loan with bad credit. Your credit rating is one of the factors used to determine how much you’ll be able to borrow and at what interest rate.

If you have bad credit you may not be able to borrow as much, and the interest rate may be higher.

However, provided you keep up with monthly repayments, a guarantor loan can also be a way of improving your credit score. 

guarantor loans

Being a guarantor means you’re guaranteeing or vouching for someone. When you act as a guarantor for someone else’s loan, you’re promising to repay the debt if they can’t. This may affect your credit score.

If you think this was helpful in any way, please do well to share and drop your comments. 

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