Guarantor Loans

We’re living in difficult times, and the recent cost of living crisis means many people struggle to make ends meet. To access finance, taking out a loan is a way to borrow money and pay it back over a set timeframe – but what if you’re not eligible for a traditional loan?

If this is you, you’re not alone. As debts mount and loan providers put in place stricter criteria, guarantor loans could be a viable option. If you don’t have a great credit score or you’ve struggled to repay loans or credit cards, this could be the financial solution you’ve been looking for.

At Believe Money, our brokers work hard to find loans suitable for your needs. Our dedicated team specialises in helping people from all backgrounds. With access to specialist lenders who judge applicants individually and charge zero upfront fees, we’re the loan broker for you. The door might seem closed on lending money, but it’s wide open with us by your side.

What is a guarantor loan?

When someone takes out a loan, they enter into a legally binding agreement with a lender. That agreement states they’ll make repayments on time each month until they pay the full amount (plus interest) off.

Unfortunately, lenders often have strict criteria to judge an applicant’s eligibility for a loan. If you don’t have a good to excellent credit score or are inexperienced with managing your finances, they might decide there’s too much risk and reject your application.

Guarantor loans require another person to secure the borrowed amount, usually a family member, on your behalf. For example, if a 26-year-old with a limited credit history wants to borrow money and doesn’t meet the eligibility criteria, the lender might ask for a guarantor.

How do guarantor loans work?

In most cases, a guarantor is usually a close friend or family member because they’ll have to take on a lot of responsibility for the loan. Lenders ask a guarantor to sign for the loan and the applicant, which means they’re guaranteeing the monthly repayments.

So, if you – as a lender – default on a payment, it automatically becomes the guarantor’s responsibility. The guarantor will also have to take on the rest of the debt if you cannot keep up with the loan repayments, as they’ve agreed to assume legal responsibility should you default.

We often see guarantors for UK property rentals but guarantor loans can make borrowing easier, giving lenders more security.

Many high street banks and building societies don’t offer these loans. You need a specialist broker like Believe Money to give you access to guarantor loan specialist lenders.

Who’s eligible to be a guarantor?

As guarantors assume legal responsibility for the loan, finding someone willing to act as one is not easy. Lenders only accept guarantors who meet the following criteria:

The person should be a family member or close friend.
Guarantors must be at least 21 years old.
Most lenders also specify that guarantors must be homeowners.
The person should have a good credit history, but excellent credit scores are more favourable.

All guarantors also go through in-depth checks from lenders and credit reference agencies to ensure they can secure the loan. Lenders must evaluate whether your guarantor has a regular income or savings to ensure they don’t default on the loan.

If everything comes back clear, most will offer a loan amount, depending on how much they feel you – and your guarantor – can afford.

How much do guarantor loans cost?

All lenders set rates based on numerous circumstances, including whether you can offer a guarantor or have a poor credit history. As each lender must look into your guarantor’s history, you’ll only learn the cost of the loan during the application process.

What are the benefits of guarantor loans?

We all know that money management is essential, but living costs make it much harder to find the funds to live, eat, and enjoy leisure time. Loans can help you budget large purchases, and guarantor loans offer numerous benefits.

You don’t need a good credit history

As you’ll offer lenders a guarantor, you won’t need a favourable credit score. While lenders will always prefer both applicants to demonstrate their financial responsibility, they might still offer a loan if your guarantor has a good to excellent credit rating.

Borrow more money

Getting someone to act as a guarantor could give you better options in terms of loan amounts. Even with a good credit rating, some lenders might not want to lend you a large sum, but guarantors can improve your financial situation.

However, it’s also important to borrow responsibly, as you will have to pay the money back each month.

Build your credit file by making monthly repayments

Another benefit of guarantor loans is how they can help you improve your credit score. If you have poor credit, making your monthly repayment on time will increase your score, giving you more options in the future.

The pitfalls of a guarantor loan

Of course, there are also some downsides to a guarantor loan, so you should be aware before jumping into the application process. Here are the most important factors to consider.

Some people aren’t willing to be guarantors

While family members, such as parents, will usually try to help their child, close friends or relatives might not want to sign for your loan. Before considering applying, you should already have the agreement of your chosen guarantor.

Having to pay off someone else’s loan can negatively impact relationships, and if you’re not 100% confident that you’ll fulfil your obligations during the loan term, you should explore other options.

The loans come with higher interest rates

You’ll also need to factor interest rates into your monthly instalments, which can be pretty high. Different loan companies will have varying rates, but personal loan agreements are a form of unsecured loan, so the interest will always be higher.

It’s essential to check with the lender before applying for the loan, as they often increase the advertised interest rate if you have a bad credit history and require a guarantor.

Getting a guarantor loan with Believe Money

If you feel a guarantor loan might be the best solution for your current situation, Believe Money can help you find a suitable lender and get the best interest rates.

We compare guarantor loans from various specialist providers and judge each case individually.

As long as you have a UK bank account and can offer a guarantor, we can help.

Get a better deal from our brokers

The biggest issue with mainstream lenders is they use set criteria to judge whether applicants are suitable. This tick-a-box scenario often means fewer borrowing solutions are available, but specialist lenders judge each individual.

Our brokers are more likely to help you get a loan that suits your circumstances and borrowing needs.

Speedy application process

You don’t want to wait ages to get a loan because we go out of our way to make the entire process as headache-free as possible. With a vast database of lenders, comparing guarantor loans with us is simple, and you’ll enjoy a seamless application.

No upfront fees

The best thing about our unique service is that we don’t charge any upfront fees. When you apply for a loan, we’ll add our fees to the amount so you can cover them in each monthly payment.

Not only is this more convenient for you, but it also means you won’t need to worry about your finances.

Get the ball rolling on your guarantor loan application today

A guarantor loan is an excellent solution for the present, but it can also lead to a better financial future with more options available.

If you’d like to find out about our service, please don’t hesitate to contact our friendly team for a free consultation. There’s no obligation to apply for a loan with us, but we’re confident that our team will find the best solution for your needs.

Why Use Believe Money?

Believe Money is an award-winning finance broker dedicated to offering the best range of affordable loan options. Whatever your circumstances or credit rating, we’re committed to getting you the best secured loan interest rates by searching our entire panel of secured loan providers.

Whatever you need a secured loan for, we’re here to help. Our specialist advisors are available Monday to Friday, so if you need any help please contact us online or give us a call on 01302 591 360.