Guarantor Loans.

A guarantor loan is used when a direct lender wants some extra security for the money they are loaning to the applicant. If the person applying for the loan has bad credit or a lack of financial history, a lender might ask for a guarantor that has good credit as a safety net. A lot of young people who are borrowing money for the first time use a guarantor loan. It allows them to start building their credit history.

In theory yes, anybody can be a guarantor as long as they meet the lender’s criteria. Most people ask a family member or close friend to act as a guarantor for them. Your guarantor should be financially stable. People tend to ask someone close to them because our finances can be a sensitive topic, so it must be someone you trust and can talk to openly.

Every direct lender has its requirements and having a guarantor doesn’t automatically mean you’ll be able to borrow more money. Some lenders will request a guarantor regardless of the amount you borrow, while other direct lenders don’t accept guarantors, although you are more likely to be asked to provide a guarantor for a loan for a higher amount.

You must contact your lender as soon as you realise you are going to have difficulty making a payment. If you fail to pay and are unresponsive to the lender’s attempts to contact you, then the lender can go to the guarantor for the overdue money. However, excellent communication can help you avoid this. It’s typically much easier and cheaper to solve an issue with the help of your lender, as this shows them you are being honest and have a genuine desire to pay. If you fail to pay and ignore the lender, they may make presumptions that aren’t true.

The guarantor is only contacted as a last resort. Most lenders will give you a chance to correct the situation before they try to recover any funds from your guarantor.

No. There’s a wide variety of lenders that offer guarantor loans, but the requirements of lenders with different specialisms can vary quite a bit. All the direct lenders we work with are registered with the FCA (Financial Conduct Authority) and will always be transparent about your loan. If you have any questions you can’t find the answer to, simply contact them to clarify the point.

Whether or not you have a guarantor is rarely the most significant factor that dictates the interest rate you’ll be charged on a guarantor loan. However, having a guarantor with a good credit history does reduce the risk to the lender, which can help to reduce the interest rate. A loans APR rate is generally set depending on your circumstances. Most lenders only ask for a guarantor to help you secure the loan when your risk profile falls within the relevant parameters.

There are many direct lenders on our brokers panel that specialise in providing loans to people with bad credit. Some will require a guarantor; others will be happy to grant you a loan without a guarantor. When you apply for a loan via Payday UK, you will be presented with the best offer available for you. It will tell you if a guarantor is required.

The application process for a guarantor loan can be completed online very quickly. Most applicants have the money in their account on the same day^*. Payday UK and our brokers panel of direct lenders have worked hard to simplify and streamline the application process as much as possible. Once you’ve completed our online application, you’ll receive an instant decision, and if accepted, you’ll be shown a loan offer for the best loan available to you.

When you apply for a guarantor loan, it will not affect your credit report. This is because Payday UK broker’s lenders initially only perform a soft credit check. This gives enough information to see which lenders can offer you a loan. After you have accepted a loan offer, the direct lender is required by the FCA (Financial Conduct Authority) to perform a full credit check before releasing any funds.

A direct lender only performs a full credit check if you accept the loan offer, so you’ll already know you meet all the criteria for the guarantor loan. If you make all the repayments as agreed the guarantor loan will improve your credit score. However, if you default on the loan or fail to stick to the repayment schedule, and don’t make contact with the lender to resolve the issue, it could harm your credit rating.