Using a Guarantor

An applicant's eligibility for a loan is based partly upon the perceived likelihood that they will be able to repay the loan. This is seen to be much greater if the applicant owns a property against which the loan can be secured, since the property can be sold to recover the debt if the debtor cannot make repayments. In the case of an unsecured loan, where no property or assets are offered as a guarantee, the applicant may be asked to provide a 'guarantor'.

A guarantor is someone who signs the loan application to confirm that they will be responsible for the repayment of the loan should the borrower be unable to meet repayments for any reason. If you feel that your loan application is likely to be rejected (because you have a poor credit rating, for example), a guarantor should strengthen your application because the lender is exposed to less risk. For the guarantor, this declaration amounts to a potentially hazardous financial agreement: guarantors should only be used if you are certain of your ability to repay the loan, but are likely to be held back by other problems, such as a poor credit score. A guarantor will commonly be a parent, partner or other close family member with a sound financial record.