Should I Guarantee a Loan? Part One

It can get uncomfortable if someone close to you asks you to guarantee a loan. In this article, Personal Loans Now explore the ramifications of being a guarantor for a loan. What does it entail? Are you putting your possessions at risk?

Personal loans now - guarantee a loan

Learning Highlights
  • Unfortunately, some people agree and sign their name without being aware of what it entails
  • You also need to consider your relationship with the borrower
  • Lenders have certain criteria for who can be a guarantor
  • A lender can chase you for the money as early as the borrower’s first missed repayment
In this article we will examine:
  • Why a guarantor is necessary
  • Who can be a guarantor
  • The procedure for guaranteeing personal loans UK
  • Additional security for the loan
  • Consequences for the guarantor if the borrower defaults

Guaranteed Loans – Why is a Guarantor Necessary?

Being asked to be the guarantor for someone else’s loan can be risky. Unfortunately, some people agree and sign their name without being aware of what it entails. To clear up any misconceptions, this article from Personal Loans Now, your best personal loans lender, will explain the entire procedure of being a guarantor and the possible consequences. By the end of part two of this article, you’ll know exactly how to reply if someone asks you ‘Will you guarantee my loan?’

Personal loans now - guarantee a loan

A lender often asks for a guarantor if someone has a poor credit record (whether this was their fault or not) and wants a bad credit personal loan. The second reason why a lender wants someone to guarantee the loan is when a borrower hasn’t had the opportunity to build up a tried and trusted credit history because they’ve never borrowed before.

In both cases, the lender is interested in recouping their losses if the borrower defaults on their loan.

Who Can Be a Guarantor?


Anyone can guarantee a loan although borrowers usually ask a family member or friend. Lenders also have certain criteria for who can be a guarantor and usually want someone who:

  • Is 18 or over
  • Has a good credit record
  • Can afford to make the loan repayments if the borrower defaults


Some lenders specify that the guarantor should:

  • Be 21 or over
  • Be a homeowner
  • Have a full-time job
  • Not have any financial links to the borrower such as a shared bank account

The Procedure for Guaranteeing a Loan

To guarantee a loan, you must provide proof of your identity, your address and bank details. Although the lender will carry out a credit search, the loan itself won’t appear on your credit record as a financial commitment. You’ll be taking a degree of responsibility for the loan, but your names won’t be linked to your credit record like a joint credit agreement.

Once you sign on the dotted line, you only have the cooling-off period (usually 14 days) if you want to change your mind. And even if you do get cold feet, you’re responsible for making sure the borrower returns the full amount to the lender.

Additional Security for the Loan

Some lenders will ask the guarantor to list a possession as additional security. This shouldn’t be worth more than the loan because of the genuine danger of repossession if the borrower defaults on the loan.

Some lenders will accept a vehicle as security while others prefer a guarantor to put up their property. This should give you pause for thought as there are possible repercussions of putting up your possessions for someone else’s loan. Let’s look at them.

Personal loans now - guarantee a loan

Consequences if You Guarantee a Loan & the Borrower Defaults

Although some people think that guaranteeing a loan is simply providing a character reference, it’s much more serious than that. The lender can chase you for the money as early as the borrower’s first missed repayment. Having to pay someone else’s loan instalments can affect your own budget – potentially for years to come. You could have problems making ends meet and have to put your own plans on hold until the loan is paid off.

If you have difficulties paying these loan repayments, any late or missed repayments will be added to your credit record. This could restrict your access to other financial products until you can improve your credit score.

Personal loans now - guarantee a loan

If you also default on the loan, the lender is within their rights to take you to court to claim back their money. The worst-case scenario is that they could apply for a charging order to force the sale of your property – even your home.

Apart from all these financial ramifications, there’s also the question of your relationship with the borrower. Whether the borrower was unlucky in their financial dealings or whether they squandered the money, this will affect your interaction. Their feelings of guilt and your feelings of anger mean your relationship will never be the same again even if they make sure they pay you back every single penny of the cheap personal loan.

Are you prepared to risk all the financial and emotional consequences? The next part of this article will explore what you should ask yourself before you unthinkingly answer ‘yes’.

Personal loans now - guarantee a loan