Loan Guarantor definition

Writer and editor - Bryan Robinson | Updated on 2023-02-20


When you take out a loan, the lender will often ask you to provide a guarantor. A guarantor is somebody who agrees to take on the responsibility for repaying your loan if you cannot. This means that, if you miss loan repayments or default on your loan, the lender will ask your guarantor to cover the cost.

What is a guarantor?

A guarantor is somebody who agrees to take on the financial responsibility for repaying a debt if the borrower does not. This means that if you have a guarantor on your loan and you miss a repayment, they will need to cover it. If you have a guarantor loan and you default on the repayments, not only will this damage your credit rating, but it will also put a strain on your relationship with the guarantor.

A guarantor is usually a close friend or family member who trusts you to repay the loan and is confident in your ability to do so. They may be asked to provide proof of their income and assets, and undergo a credit check before the loan is approved.

Guarantors are commonly used when somebody is looking to borrow money but doesn’t have a good enough credit score to qualify for a loan on their own. The thinking is that because the guarantor has good credit, they’re more likely to repay the debt if needed.

The responsibilities of the guarantor

A guarantor is a person who agrees to be held responsible for another person’s debt or financial obligation if that other person is unable to meet their responsibilities. A guarantor may also be referred to as an ‘accommodation provider’.

As the guarantor, you may be asked to provide a guarantee to a lender, such as a bank, which gives the lender security should the borrower default on their loan repayments. Guarantor loans are often used by people with little or no credit history, or by people who have been recently bankrupt.

If you are considering becoming a guarantor, it is important that you understand your obligations and rights, as well as the risks involved. It is also important to ensure that you can afford to make the payments yourself, if necessary.

The benefits of being a guarantor

A guarantor is someone who agrees to repay a loan if the borrower is unable to. This is usually a family member or close friend. The main advantage of being a guarantor is that it allows the borrower to access a loan they may not have been able to get otherwise. It can also be a way to get a better interest rate.

However, there are some risks associated with being a guarantor. If the borrower defaults on the loan, the guarantor will be responsible for repaying it. This can put a strain on personal finances and relationships. It’s important to make sure you can afford to make the loan payments before agreeing to be a guarantor, as if the other loan owner defaults, you will have to make the payments. It will also have a negative impact on your credit score.

Who can be a guarantor?

In most cases, a guarantor will be a family member or friend. However, it could be anyone willing to go in with someone on a loan who meets the proper finacial requirements.

Criteria for being a guarantor

There are a few key things to consider before becoming a guarantor. Firstly, you should make sure that you understand the loan agreement and what being a guarantor entails. Secondly, you need to make sure that you can afford to be a guarantor – this means being able to cover the repayments if the borrower misses any. Finally, you should only become a guarantor for someone you trust.

If you meets the above criteria and decide that you would like to become a guarantor, there are usually a few more steps involved. Many lenders will require that you undergo a credit check and provide proof of income. You may also be asked to provide collateral, such as property or shares. Once you have provided all of the necessary information and documents, the lender will make a decision on whether or not to approve your application.

How does being a guarantor affect your credit score?

There are a few ways in which being a guarantor can affect your credit score. Firstly, if you are listed as a guarantor on a loan, this will show up on your credit report. Lenders will see that you have guaranteed someone else’s loan and this may affect their decision when considering you for a loan in the future.

Secondly, as stated earlier, if the person you have guaranteed fails to make their loan repayments, this will also be reflected on your credit report. This may damage your chances of being approved for a loan in the future as lenders will see that you have been associated with someone who has defaulted on their loan payments.

Finally, if you are called upon to pay off the debt of the person you have guaranteed and you are unable to do so, this will also be reflected on your credit report. This can damage your credit score significantly and it may take some time to recover from if you are ever in this situation.


A guarantor is someone who pledges to repay a loan should the borrower default. The guarantor accepts responsibility for the debt and agrees to make payments if the borrower is unable to do so. A guarantor may be required for certain types of loans, such as student loans, business loans, and mortgages.

There are several benefits to having a guarantor, such as improved chances of getting a loan and lower interest rates. There are also some risks associated with being a guarantor, such as being held responsible for the debt if the borrower defaults.

Bryan Robinson

Bryan Robinson
Writer and editor

Bryan Robinson is a finance writer with expertise in lending and their interest rates, fees, contracts and more.
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