Should I Be A Guarantor?

Guarantor loans are a quite common financial product in the UK, as they provide finance for those that might struggle to get it elsewhere. However, the role comes with risks, and it is not a suitable product for everyone, because of the strain it can put on relationships. We took a look at a common question: should i be a guarantor? 

What’s involved in being a guarantor? 

A guarantor is essentially someone who “guarantees” a loan on behalf of the borrower. So if there is a problem with the loan being repaid, they then become responsible for what is owed. They agree to pay the borrower’s repayments should they fail to make their payments. In reality, the guarantor should not, and usually does not, ever have to pay a penny towards the loan repayments. But they are an insurance policy for the lenders, for borrowers with a mixed or poor credit history. The lenders are more likely to lend knowing they have this insurance to fall back on. It is estimated that one in five guarantors end up having to assist in repayment of a loan, so you need to assess the risks and be aware of possible consequences before proceeding. Here’s what you should consider…

Is the borrower responsible with money?

Questions you need to ask include are they responsible? Do you trust them? And why do they need the money? You need to evaluate the reasons for the loan, and ensure they are in a position to pay it back. Being a guarantor requires you to have a dialogue with the borrower so that you know exactly where you stand. Ask them how desperately they need the money and what they need it for. You need to trust the borrower as it could be your money on the line should anything go wrong.


What’s more, if the person you act as guarantor for is close to you, it could put an important relationship under strain. There has to be an element of trust with this type of loan. Do not be afraid to say no and decline being a guarantor if you have a bad feeling about it. You should not feel obliged to be one.

Should I Be A Guarantor? Will you qualify?

The criteria for being a guarantor will differ from lender to lender. Generally however, you need to be over 21, employed and able to afford the monthly repayments. A good credit score will of course help too, and if you are a home owner, this will be a big plus. just like the borrower, you need to be confident that if need be, you will be able to budget for making repayments. Do not agree to be one if you have any doubts on this score. If the person borrowing the money defaults on their payments and you are unable to make them, then this will be added to your credit report and affect your credit score.Once you’ve signed a loan agreement and the loan has been paid out to the borrower, you can’t change your mind.

Should I Be A Guarantor? Personal Relationships

The final issue you need to think about is your relationship with the person borrowing money. This is vital when deciding what to do. If they default and you end up paying their debt, would you be angry at them? Would you be able to forgive them? Or would your relationship suffer and be at risk?Being a guarantor is a fantastic way to help loved ones borrow money, but it can also end up causing tension and problems so it certainly shouldn’t be rushed into.