What Is a Guarantor & How Does It Affect Me?


In this article, we’ll delve deeper into what it means to be a guarantor and the potential pitfalls to watch out for.

If you’re thinking of taking out a loan or mortgage, you may have come across the term “guarantor.” A guarantor is a person who agrees to take responsibility for repaying the debt if the borrower defaults. By acting as a guarantor, this person is essentially vouching for the borrower’s ability to repay the loan.

However, being a guarantor is not without risks. If the borrower fails to make payments, the guarantor becomes liable for the debt and their credit rating may be affected.

In this article, we’ll delve deeper into what it means to be a guarantor and the potential pitfalls to watch out for.

What is a guarantor?

A guarantor is someone who agrees to be responsible for any loan you take out. If you become a guarantor you will be contractually liable for someone else’s debt if they can not pay it.

As a guarantor, you will have to sign a document with a witness present to say that you are willing to be responsible for the other person’s loan or debt repayments.

Common products that may require a guarantor include tenancy agreements, mortgages and loans.

Why do people need a guarantor?

People may need a guarantor for a variety of reasons. One common reason is that they have a poor credit rating or no credit history. If the lender runs a credit check, it can make it difficult to get approved for a loan or mortgage. In these cases, a guarantor with a good credit history can help to reassure the lender that the borrower will be able to repay the debt.

Another reason for needing a guarantor is when the borrower is taking out a loan or mortgage for a larger amount than they can reasonably afford to repay on their own. The guarantor can help to bridge the gap between the borrower’s income and the amount of the loan or mortgage.

Sometimes, lenders may require a guarantor as a condition of the loan or mortgage agreement. This is especially common for younger borrowers or those without a stable source of income. In these cases, the guarantor is typically a family member or close friend who is willing to vouch for the borrower’s in the guarantee agreement.

What types of arrangement might benefit from a guarantor agreement?

There are several types of arrangements that may benefit from a guarantor agreement. Some popular examples are listed below.


One of the most common agreements that could benefit from a guarantor is is a mortgage. In this scenario, a guarantor mortgage may be used to help a borrower get approved for a home loan that they may not otherwise qualify for on their own.

Tenancy agreement

Another arrangement that may benefit from a guarantor is a tenancy agreement, particularly for individuals who may have a poor credit history or who are renting for the first time.

In this case, a joint tenancy agreement and separate bank accounts may be used to ensure that rent is paid on time, and the guarantor can help cover any unpaid rent if necessary.

Loan agreement

In addition, a guarantor may be used for loan agreements, particularly for those with poor credit or who are self-employed. A guarantor loan may help to increase the likelihood of approval and may also help to secure a more favourable interest rate.

However, it’s important for both the borrower and the guarantor to understand the risks involved and to carefully review the terms of the guarantee agreement, particularly in the event of agreement defaults.

Can anyone make a guarantor agreement?

Anyone can become a guarantor. However, this person should be some you trust, such as a parent, sister, brother, uncle or aunt.

This person should also be willing to cover repayments if you can not do so. A guarantor must be over 21 years old, with a good credit history and financial stability.

Can you be a guarantor if you have a bad credit history?

While having a good credit history can increase the likelihood of being accepted as a guarantor, it is still possible to act as a guarantor with a poor credit history. However, this will depend on the lender’s requirements and the severity of the guarantor’s credit issues.

Additional security

If a potential guarantor has a poor credit history, the lender may require additional security or a larger deposit, or may ask for another guarantor with a better credit rating. Alternatively, the borrower may need to look for other financing options.

Credit checks

It’s important to note that being a guarantor comes with certain risks, and if the borrower defaults on the loan or mortgage, the guarantor will be responsible for repaying the debt. Therefore, it’s essential for the guarantor to carefully review the terms of the agreement, including the potential consequences of non-payment.

Additionally, the guarantor should consider their own financial situation carefully before agreeing to act as a guarantor, especially if they have any outstanding debts or financial commitments.

Financial risks

The lender will typically conduct credit checks on both the borrower and the guarantor to assess their financial situation and determine their creditworthiness. If the guarantor has a poor credit history and the lender decides to proceed with the agreement, the guarantor may face higher interest rates or stricter terms and conditions.

Ultimately, the decision to act as a guarantor should be carefully considered and based on the individual’s financial situation and ability to take on the associated risks.

Does being a guarantor affect my credit history?

As a guarantor, your credit history can be affected if the borrower defaults on the loan or mortgage payments. If the borrower misses payments, this will show up on your credit report, which can have a negative impact on your credit rating.

If the borrower is unable to make the payments and the debt falls to the guarantor to repay, this can also affect your credit history. The lender may pursue legal action against you to recover the debt, and if they are successful, this can result in a County Court Judgement (CCJ) or other legal action being taken against you.

These can have a significant impact on your credit rating and can make it harder for you to obtain credit in the future. Before agreeing to act as a guarantor, it’s important to carefully review the terms of the guarantee agreement and to consider your own financial situation and ability to take on the associated risks.

Does being a guarantor affect my mortgage?

Yes, if you choose to act as a guarantor, it could affect your future mortgage applications. When applying for a mortgage, lenders typically review your credit history and financial situation to assess your creditworthiness and ability to make repayments.

If you have acted as a guarantor in the past and had to repay someone else’s debt, this could impact your credit history and make it more difficult to obtain a mortgage. The lender may view you as a higher risk borrower and may offer you less favourable terms or higher interest rates as a result.

However, if you have acted have been involved in guarantor mortgages in the past and the borrower has made all their repayments on time, this may have a positive impact on your credit history and may actually improve your chances of obtaining a mortgage.

<strong>Maxine McCreadie</strong>

Maxine McCreadie

Maxine is an experienced writer, specialising in personal insolvency. With a wealth of experience in the finance industry, she has written extensively on the subject of Individual Voluntary Arrangements, Protected Trust Deed's, and various other debt solutions.