Can you apply for a loan on behalf of someone else?

Perhaps you are in a situation where you have a friend or a family member which is in need of a loan but has tried and cannot get one themselves. This may be because they have bad credit/ a poor credit history.


As such, they may have asked you to take out a loan on their behalf. If you are put in this position, it can be hard to know what to do. Of course, you will want to help your friend or family member, but you also have to weigh up the options before making that decision. To help you out, we have put together some things that you need to consider before you take out a loan to give to someone else.

You are responsible for repaying the loan in full

The number one thing you cannot forget is that if you take the loan out, you will be the one who is responsible for repaying the loan back in full, plus interest. Furthermore, you will have to deal with the loan whilst it is on-going. Despite the fact you are taking the loan out for your friend or family member, you are making the agreement with the lender in your name, so it is you and only you, that the legal responsibility will fall on.


This is all well and good until your friend or family member cannot repay you and you are stuck with this debt. So even if the person you are helping out does not repay you, the lender will not make any exceptions as it was you who took out the loan, not them (legally speaking).

If you do not have enough money to cover the repayments, it may cause some serious damage to your credit score and your chances of taking out money in the future could be much slimmer. The lender may even take out legal action against you. What is sure is that they will not be chasing up the person you took the loan out for, they do not have any of their details and it is actually not legally their problem. In the lender’s eyes, you helping your friend or family member out in this way is just an unofficial agreement between the two of you.

Why are they asking you to take out a loan?

After considering all of the above, you should really question why it is your friend or family member is wanting to take out a loan. You should not be afraid to find this out, it is your money on the line anyway. If they are asking you for the loan due to their bad credit history, you should consider whether they will be able to repay you at all.

Set up an agreement

If you do choose to go ahead and take out a loan for your friend, you should set up an agreement between the both of you and this should really be in writing. You should specify how much you are going to take out for them via a loan and also when they are going to pay it off and how. A good way to enforce this is to ask them to set up a standing order which will be linked to their bank into yours which will cover the monthly payments.


If you do the standing order, make sure they set it to come out of their bank account a few days before the lender is going to take the repayments from yours. This way, you will know you have enough money in your account to cover it.

Guarantor Loan

If you are uncomfortable with taking out a loan on behalf of someone else, why not consider another option – a guarantor loan. This is where your friend or family member will be able to take out a loan, even if they have bad credit, but you will co-sign it with them. By co-signing it, you will agree to pay back the loan if the borrower fails to do so.

Daniel is a loans expert based in London and has been working in the payday loans industry since 2010.