Do You Need a Guarantor for a Loan?

Having a guarantor can increase your chances of being approved for a loan. If you don’t have a loan guarantor, other options may be available. You can still get a new loan with no guarantor.

Do I Need a Loan Guarantor?

Most personal loans won't require a guarantor. If you have a poor credit history, you can find a lender that asks for a guarantor, where you are more likely to be accepted. They will be liable for the loan if you fail to keep up repayments.

Guarantor loans have risen in popularity through recent years. Despite feeling new, these loans fall back on old traditions of vouching for the people you know. To apply for one of these loans, you’ll need someone that trusts you to manage your money.

Your guarantor agrees to take responsibility if you can’t pay back your loan, so you’ll need to find someone in a good financial position.

You’re more likely to find a loan guarantor if you can show how you’ll keep up with your repayments.

Read on to learn more about loan guarantors and how to get a loan if you don’t have one.

Looking for other information on Loans? This guide has info on 'No Guarrantor needed for new loan'. We have also writen extensively about:

• - Do I need a credit check for a loan?
• - Poor credit loans explained
• - What are my options for a loan?

We update all our guides regularly. If you are researching loans and we haven't got an exact guide that helps you, keep coming back as we update daily.

What Is a Loan Guarantor?

Anyone can be a loan guarantor if they meet certain financial criteria. Usually, lenders ask that loan guarantors are homeowners on a good salary.

A guarantor backs your loan. They hope that they’ll never need to be involved, but they’ll sign their name on the dotted line. If you start missing repayments, or can’t pay back what you owe, your guarantor is expected to pay. Usually, a guarantor is someone that knows you well.

They should trust that you’ll meet your financial obligations so that they don’t need to take on your debt. They might feel more comfortable if you show them exactly how you plan to make loan repayments. Usually, a guarantor is a parent, with 41% of guarantors being either the mother or father of the customer.

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Loan Guarantors Aren’t Always Needed

Guarantors aren’t always needed, but they can help if you have bad credit and struggle to get loans on your own. A guarantor is an extra layer of security for lenders, so they’ll have a higher chance of getting their money back even if you can’t keep up. As a result, lenders are more likely to approve a loan with a guarantor.

Becoming a guarantor is a big risk. Not everyone can find someone else that’s willing to take on that commitment. Fortunately, it’s possible to find loans without a guarantor and with bad credit.

Indeed the vast majority of loans in the UK don’t have a guarantor as part of the agreement. Research carried out by StepChange showed that, of their 357,525 clients that they were advising in 2018, only 22,281 of those had some form of debt that included a guarantor in the agreement.

Getting Loans With Bad Credit

A bad credit rating can limit your borrowing options.

Over the course of your adult life, you’ll build up a credit file that covers your borrowing history. Anything can end up on your credit file, from your student overdraft to car loans and from your mobile phone contract to your mortgage.

If you start to miss payments or get into too much debt, your credit score will start to drop. You may also have a bad credit rating if you’ve never borrowed in the past, as a good credit score relies on evidence to show that you can manage your money.

A lender’s decision is never as simple as it seems. Lenders don’t always want the best credit scores, because they want to make a profit from their loans. They often prefer borrowers that make a few missteps and end up paying more overall, but as they eventually want their money back a very bad credit rating harms your chances.

Guarantor loans are just one option. You can increase your chances of approval by finding a way to back your loan. You need to show a lender that they’ll get their money back, even if you’ve not done well in the past.

Bad Credit Loans Without Guarantors

Without a guarantor, there are still many bad credit loans that you might be able to access. Options include secured loans, where the value of your loan is secured against something else that you own. A logbook loan is an example of this, with your loan secured against your car.

Some poor credit loans don’t need a guarantor or any form of security, but your chances of approval will be lower and you may have to search around for longer.

If you have bad credit, you might also consider alternatives like credit cards. Credit builder cards will help you to improve your credit score, which means that you’re more likely to be approved for any future borrowing.

With very bad credit, loans are harder to come by. You’ll pay a high price for any loan you can get, and may come upon rejection at every turn. In those circumstances, it may be better to look for alternative methods of raising funds or, if you’re struggling with other debts, support from a debt services charity.

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Problems With Bad Credit Loans

You should be careful if you’re considering a bad credit loan. If you’re already in a bad financial position, more borrowing could simply make things worse. It’s important not to get caught in a spiral, borrowing more because you can’t keep up with existing repayments.

If you’re struggling with debt, speak to advisors before you apply for more loans. You could also consider speaking with your current creditors to ask about reducing your payments, as they will often be flexible in order to help you through any times of hardship.

If you need money quickly, a bad credit loan may seem like your only option. You should expect to pay more for this type of loan. To accommodate the extra risk, lenders charge high interest rates and borrowing may be more expensive.

Instant Decision Loans With No Guarantor

Guarantor loans may be processed quite quickly, but often the decision isn’t instant. Your lender would need to check that your guarantor was happy and would need to run more in-depth credit checks.

When lenders check for guarantor loans, they need to be sure that your guarantor meets all their lending criteria. They may need evidence of homeownership and a regular income. Processing a guarantor loan can take days or even weeks.

Often your loan will be processed faster if you don’t have a guarantor. In these cases, only your credit score matters. Your lender may even offer instant decisions, and these may be approved automatically.

Instant decision loans with bad credit aren’t the easiest to get, but if you can show that you’re earning enough then your application may be approved.

Finding a Loan Guarantor

If you’re struggling to find loans without a guarantor, you might want to look for someone to help. Remember that a guarantor is taking on a very big commitment. You’ll need to gather evidence to show a guarantor that you’re serious about your money management. Since they’ll be responsible for your debt you’ll have some convincing to do!

Knowing and Improving Your Credit Score

Knowing your credit score, and working to improve it, can help with future loan applications. If you don’t need money straight away, this is the best route to take. This will also give you time to think about a loan and whether other options are available.

You could consider a credit builder credit card, a small mobile phone contract or purchasing an item on credit. If you can keep up with repayments, however small, your credit score will start to improve.

Use our guides to learn more about loans, guarantors and your credit score. You can also speak to one of our trusted financial partners, helping you to evaluate your options and find the loan that’s right for you with bad credit.

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How Can Money Savings Advice Help You With Getting a Loan?

Here at Money Savings Advice, we have partnered with some of the UK’s leading loan broker companies. They have already helped thousands of people get the best loan that suits their needs, and they can do the same for you.

Choosing an independent loan broker means they won’t proceed with an application unless they are sure it is in your best interests. They are also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these loan brokers who can help you get a loan, then click on the below and answer the very simple questions.