How to find a Guarantor

  • A plan to find your guarantor
  • Who the lenders will accept
  • Who will be rejected
  • Focus on Family & Friends
  • Seek those who trust you
bald young man in grey short smiling

This is Trust-based Lending

If you’re looking to borrow money but you don’t have a perfect credit score, guarantor loans provide a great alternative to traditional banks and lenders. This type of finance is simple and fast but does require someone who is willing to guarantee your repayments.

Lenders will need to approve the person supporting your application and that person will need to be comfortable with the responsibility. So, how do you find a guarantor for a loan so that you can ensure your application will be a success?

The choice of a guarantor and the decision of who to choose to be a guarantor is an issue of trust:

  • Who do you trust to step in and help you out if you struggle to repay the loan at any time?
  • Who trusts you to do your best to repay the loan and not to rely on them?
  • Who does the lender trust to act as your guarantor if needs be?

Understand what you're asking of the guarantor

Being a guarantor for someone is an interesting responsibility – if the borrower makes their repayments in full, and on time, then the guarantor doesn’t have to do anything at all. However, if problems arise then the person providing the guarantee may have to make one or more payments on behalf of the person they are guaranteeing. If that person runs into serious problems financially then the guarantor may have to pay off the rest of the loan.

So, the position could involve virtually no action and no financial implication – or it could involve a lot. Anyone who is thinking about doing this will be considering the implications for their own finances – and their own credit score. So, before you ask anyone to help you out in this way, make sure you understand what you’re asking them to do.

Lender Criteria for an Acceptable Guarantor

Lenders will credit check any guarantor you put forward. So, to maximise the chance that your guarantor is accepted by them you should make sure your guarantor:

  • Is aged 18 to 70 (these vary a little by the lender)
  • Has a good credit rating
  • Has a decent income from employment, pension or investments
  • Is a homeowner – however, a very high proportion of lenders will accept non-homeowners although you may have to pat a higher rate of interest.

People who can’t be a Guarantor

If you’ve been through the above list and nothing jumps out then you can always widen your search to include some people you may not have considered the first time around. As long as the person knows and trusts you there should be no issue with them supporting your application. It’s worth noting that there are some people who don’t make good guarantors – these include:

  • People who live overseas. Most lenders won’t accept anyone if they haven’t lived in the UK for at least three years. Three years is long enough to demonstrate a credit history that a lender can rely on. If someone doesn’t live in the UK right now then lenders know that it will be difficult to reach them if they are required to pay out under the guarantee. That’s why someone who lives abroad is generally not an option.
  • Anyone whose income is too low. There are some exceptions to this but, in general, if you are planning to ask an unemployed friend or family member to guarantee the repayments then they may not be a good option. If they are a homeowner then they could still be accepted by a lender but in any other situation, it’s unlikely unless they have a reasonable income. Their income can be from a pension or from investments. It doesn’t have to be earned income.
  • An individual whose financial situation is likely to change. That could be someone who is about to retire, go on maternity leave or move from being full time employed to being freelance.
  • Someone you have made up. Lenders will always check the identity of anyone you name as a guarantor so it’s just not worth the risk of submitting the details of someone who doesn’t exist, even if you’re really stuck.

Who could be your guarantor?

The first place to start when you’re looking at how to find a guarantor is to make a list of your options:

  • Look at friends and family first. The best person to act as your guarantor will probably be someone who knows you well. There is quite a lot of trust involved in this relationship and they are much more likely to say yes if they know you well enough to believe you will do your best to make the repayments on the loan yourself.
  • Work colleagues may also be an option. It depends on how comfortable you are being open about your finances with them. A guarantor may want to get a clear understanding of your financial situation, including why you want to borrow and why traditional lenders are not an option. Whether you are happy to disclose that kind of information to a colleague will depend on your relationship with them.
  • The ideal person will have a good credit rating. Effectively, a lender is using your guarantor’s credit score in place of your own so it is essential that the person you ask has a positive credit history that will appeal to a lender. Otherwise, the application may not be successful.
  • Only adults can be guarantors. You’ll need to ask someone who is over the age of 18. Some lenders may require a person who is over the age of 21.
  • Homeowners are a fantastic choice. Anyone who owns their own property has an asset that will give a lender confidence when it comes to approving them as a guarantor. Not all lenders ask that someone providing a guarantee is a homeowner – often it’s fine if that person is a tenant. However, it’s certainly an advantage if the person you ask owns their own home.

Key steps to finding a guarantor

  1. Make a shortlist of people you think would be ideal to guarantee your repayments to the lender.
  2. Start with the person who is the best fit and then work your way down the list if they refuse.
  3. Make sure you understand what’s involved for them and be prepared to answer any questions they ask you about the process.
  4. Be open when it comes to your financial situation, why you need the money and how you’re going to pay it back.
  5. Provide some reassurance about how seriously you take the obligation to repay and the fact that you don’t want them to have to shoulder the financial burden for you.
  6. Make sure you have a face-to-face conversation or at least a chat on the phone so that you’re not talking about it entirely by email or text message.
  7. Don’t be insulted if they say no – just find someone else.
  8. If they are happy to help you out then you can go ahead and make your application for a guarantor loan. You’ll need to include their details after the initial application stage so that the lender can credit check them too.

Finding a guarantor for a loan is quite straightforward and could help you to get the unsecured loan you need that you might otherwise not be able to because of your credit history.

 

Guarantor Loans Guide

If you’re uncertain which type of credit might suit you or you have a money problem then one of guides may help you. We summarise each type of loan and their pros and cons, and address issues regarding debt and credit ratings.

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Written/Reviewed by: Amanda Gillam

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