Debt Management and Your Credit Score

Dealing with debt: What is a guarantor?

Here’s everything you need to know about how what’s expected of a guarantor

Woman speaking with a guarantor

If you’re looking to get a mortgage, loan or rent a property for the first time and do not have a good credit rating or a limited credit history, you may be asked by the lender to provide a guarantor. But what is a guarantor, and what is expected of them?

What is a guarantor?

A guarantor is someone that helps you be approved for a loan or mortgage, or to secure the rental of a property, by agreeing to pay your monthly payment or rent should you default on the agreement. Therefore, it is quite a responsibility to be a guarantor for someone.

Essentially, being a guarantor means that you are ‘guaranteeing’ another person’s loan, mortgage or rent on a tenancy agreement by promising to pay the debt on their behalf if they can’t afford it. In most cases, parents or close relatives will act as a guarantor. Ultimately, it must be someone you trust and who is willing to cover your repayments if you can’t do so.

Why would someone need one?

There are a number of reasons why someone would need a guarantor, such as to rent a property, get car finance, a loan or a mortgage, but the lender or landlord can insist on a guarantor if:

  • The borrower doesn’t have a credit history; for example, they are students or young people, or they have just arrived in the country.
  • The borrower is on a low income and/or benefits.
  • The borrower has just started a new job.
  • The borrower has a low credit rating or bad credit.

Who can be a guarantor?

Not everyone can be a guarantor. Certain criteria must be met:

  • You must be 21 years of age or older.
  • You must have a good credit history.
  • You must be financially stable.
  • You must be a UK resident.

Many lenders and landlords also request that the guarantor is a homeowner and in full-time employment. If you are thinking of being a guarantor, you must be aware that you are entering into a financial agreement. You must also be confident that the person you are a guarantor for can honour the agreement they’ve made. 

Can being a guarantor affect my credit rating?

Any lender or landlord will conduct a credit check on a guarantor. If the person you are acting as guarantor for upholds the agreement and makes their payments on time, it will not appear on your credit record. However, if they default and you start making the payments, this will go on to your credit report.

The other aspect to consider is that once the guarantor has signed the agreement, they cannot be removed as their credentials secure the loan or tenancy. However, a guarantor on a mortgage can, at some point, be removed as long as the borrower has sufficient equity in the property or land, and can re-mortgage, releasing the guarantor from the agreement. One point to note is that being a guarantor may affect that person’s ability to get a mortgage. The lender will consider this when assessing affordability should they have to take on the borrower’s debt.

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