When we take out a loan, we need to convince the lender that we have the ability to repay it. They will do certain checks in order to look at this. If the loan is secured against property, such as a home or car, then they will check the value of these to make sure that they will be able to sell them and make back the money owed if necessary. If it an unsecured loan, then they will look at income and credit rating. If they are not satisfied with these then they will not allow the loan. However, it is possible with some loans, that you can nominate a guarantor, who has a good credit record, who will make any repayments that you are unable to. There are pros and cons to having a guarantor and it is worth thinking about them before signing up to a loan like this.

Pros of having a guarantor

Having a guarantor will allow those that have nothing to secure against a loan and a poor credit record, to still be able to borrow money. This means that it can be a great advantage if money is needed. Knowing that there is someone there to help out if you struggle with loan repayments can also be reassuring compared with having the responsibility all on your own.

Cons of having a guarantor

Obviously you will need find someone willing to be a guarantor for you. This could be difficult depending on whether you know anyone who has a good credit record and will be prepared to do this for you. You also need to make sure that you are in agreement with them as to what will happen if they have to make a repayment as to whether you will repay them and when you will do this. If you do not sort this out between you then you could end up falling out over it. You may also find that there could be jealously among family or friends if you do not have to repay It but they do not get anything themselves. Obviously if they do not know about it then this will not be a problem.


Another big factor is the cost. All loans cost money and some are more expensive than others. A guarantor loan tends to be on the pricier side. This means that if you have other options then it might be wise to take those up instead. Do compare prices though as even if something is generally dearer, it might depend specifically on your credit rating and the lender as to whether it is a dearer option for you. Lenders may change their rates from the advertised ones you see, if they feel that you are more of a risk than the average customer. Therefore make sure you contact the lenders for quotes rather than just assuming that they will lend to you at their advertised prices.

Do make sure that you take all cost into account as well. It is not just interest that tends to be charged on loans but other costs as well. You may have setup costs and there will be charges if you are late on a repayment or miss one and maybe if you want to overpay. Therefore you need to take these things into account as well. Even if you think that you will make all of the repayments on time, it is still worth just checking what the charges would be. This should not only give you more incentive to make sure that you do pay them on time but you will be able to compare the costs across different lenders.


It is worth thinking about whether you really need the loan. If you do then make sure that you find out what types of loans you will qualify for and then compare then to see which is cheapest and which provides the best value for money. If a guarantor loan is one of the options that you want to pursue then consider who you could ask to be a guarantor for you and whether they are likely to want to help you out. It can be worth chatting to them beforehand about what their expectations will be with regards to the loan. Make sure that you agree on whether you will pay them back if they do have to help out and if so, how quickly they would want their money back. It might be best to even write down a agreement and sign it, so that you cannot argue in the future about what the original agreement was. It is not good to fall out with a friend or family member over anything and money can often be a particularly sensitive issue and so it is wise to be really careful in this situation.