Almost anyone can be your guarantor. In most cases people tend to choose one of the following to obtain their loan:
However, there are certain requirements that an individual needs to meet to become a guarantor. For example, most lenders will require the guarantor to be:
- Over 21 years old
- A good credit score
- Financial stability
- Homeowner (though not always a necessary requirement)
Whether you are asking someone to be a guarantor or someone has approached you to be one, you should make sure it is someone you trust and you are aware of the financial implications. Once agreed on (and after the initial two-week cooling-off period has passed), it is not possible for someone to stop being a guarantor.
Why would someone need a guarantor?
- No credit history
- New employment
- Low salary
- Bad credit score
A person may need one in order to get a guarantor loan. There can be a range of reasons why someone may be applying for this kind of loan.
Common reasons include lacking a credit history, as it increases the likelihood of a traditional lender declining a person’s application.
An individual may lack a credit score as a result of being a young person and having never taken out credit before, or if a person has recently become resident to the UK, amongst other things.
Starting a new job can also be another reason why someone may need a guarantor for a loan. This can be because the lender needs proof of a stable income, which often takes the form of being employed at the same company for a period of time. If someone has just started a new job somewhere, it may impact their ability to apply for a standard loan.
A low salary can also be another factor leading someone to get a guarantor for their loan. The guarantor’s background can be the difference between someone gaining access to finance or not, as their financial information is more important than the main borrower’s with this kind of loan. This is because they are legally responsible for paying back the loan should the main borrower be unable to.
Poor credit scores may also lead someone to apply for a guarantor loan. An applicant may have a bad credit history due to a history of missed payments, previous bankruptcy or CCJs on their credit file, to name but a few reasons. the creditworthiness of the main borrower is based on the guarantor.
Who can’t be my guarantor?
Most guarantor lenders will not accept a nominated guarantor if they have bad credit, do not live in the UK, or do not have a stable income.
The main aspect lenders will be taking into consideration will be the guarantor’s creditworthiness. The guarantor is supposed to be deemed less of a risk to lend money to compared to the main borrower. If the evidence does not suggest this is the case, the application is likely to be declined outright.
Will my guarantor have a credit check carried out?
Yes, as with any other loan application a credit check will be carried out. This is in order to assess the level of risk involved to the lender approving the loan. The credit check will review the guarantor’s financial history, in order to determine if it is likely that they will be able to make loan repayments.