Finance glossary
Guarantor Loan
Also known as: Guaranteed loan
In simple terms
A guarantor loan is borrowing where someone else — usually a family member or friend — promises to make the repayments if you cannot. Their promise is what makes the lender willing to lend.
On this page
What does guarantor loan mean?
A guarantor loan is a personal loan that relies on a second person — the guarantor — agreeing to cover the repayments if the borrower falls behind. It is often used by people with a thin or poor credit history who cannot get a standard loan on their own.
The guarantor is usually a partner, parent or close friend who is a homeowner or has a strong credit record. They do not receive the money, but they are legally on the hook for the debt.
How a guarantor loan works
The borrower applies and names a guarantor, who is credit-checked and must confirm they understand their commitment. If the borrower misses payments, the lender can pursue the guarantor for the full outstanding balance, not just the missed amount.
Rates are typically higher than mainstream personal loans but lower than most bad-credit or short-term credit. Repayments are made over a fixed term, and keeping up with them can help the borrower rebuild their credit file.
How could this affect me?
If you are the borrower, a guarantor loan can open access to credit you would otherwise be refused — but a missed payment can harm both your credit file and your guarantor’s, and can strain the relationship.
If you are asked to be a guarantor, treat it as seriously as borrowing the money yourself. You could be asked to repay the whole debt, and it can affect your own ability to borrow while the loan is live.
Things to watch out for
- The guarantor can be chased for the entire remaining balance, not just one missed payment.
- Missed payments damage both the borrower’s and the guarantor’s credit files.
- Rates are usually far higher than a standard personal loan — compare alternatives first.
- Being a guarantor can reduce how much you can borrow for yourself.
Know your rights
- Guarantor loans are regulated consumer credit under the Consumer Credit Act 1974 and FCA rules, so both borrower and guarantor must be given clear information.
- The borrower normally has a 14-day right to withdraw from the agreement.
- If a lender lent irresponsibly or did not properly explain the guarantor’s liability, you can complain and escalate to the Financial Ombudsman Service.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- MoneyHelper, Guarantor loans explained (opens in a new tab). Accessed 22 Aug 2026.
- FCA, CONC 5 — creditworthiness and guarantor lending (opens in a new tab). Accessed 22 Aug 2026.