A guide to guarantors in the UK

If you’re looking to take out a mortgage, loan, or even rent a property for the first time, chances are you’ve seen the word ‘guarantor’ pop up on various estate agent and lenders’ websites. But what exactly is a guarantor? And why might you need one? 

Today, we’re going to give you all the information you need about guarantors in the UK. We’ll tell you who needs a guarantor and when you might be asked for one, as well as who can act as a guarantor and who can’t. Finally, we’ll answer the question: what information does a guarantor need to provide in the UK?

So without further ado, let’s get down to business. 

What’s a guarantor?

Simply put, a guarantor is someone who guarantees to pay your rent, mortgage or other type of payment in the event that you can’t. 

These guarantors enter into a legally binding contract with the lender and agree to effectively pay your outstanding debt, if you are not able to make your own payments, for a period of time. 

Given this type of financial responsibility, guarantors tend to be people close to you, for example, a parent, friend or family member. But who you ask to be a guarantor can be anyone who is over the age of 18 (or 21 in some cases) and who has a good credit history and/or steady income. 

Guarantors are generally requested when you want to take out a loan, or other large sum of money such as a mortgage, or sometimes for things like rental payments. The lender will request a guarantor if they believe that you are not in a financially viable position to make your payments regularly. This could be because you are unemployed or have low income, outstanding debts, a bad credit history, or you’re simply too young to have much of a financial history at all. 

When will you need a guarantor?

As mentioned, guarantors are generally requested by lenders when you want to borrow a significant sum of money, or make large, regular payments, such as rent. 

For example, you probably won’t find that you need a guarantor to take out a mobile phone contract, but you will almost certainly need a guarantor if you want to take out a £25,000 loan. 

But it’s not just big-ticket loans and mortgages that may need a guarantor. For instance, if you are student or a first-time renter, or have moved to the UK from abroad, a lender may also request a guarantor because you lack the necessary financial/credit history usually needed for such contracts. 

Therefore, you may need a guarantor when you want to rent or buy a property, take out a loan, or apply for credit with a major lender. 

Why will you need a guarantor?

Generally speaking, guarantors are there to give peace of mind to lenders, if you are not what they consider to be an optimum investment. 

Let’s think of it this way: you have a friend who wants you to buy a concert ticket for them, but this friend has a very low-paying job and often can’t afford nights out. So you might wonder if buying their ticket for them is a good idea. You want your friend to enjoy the gig, but you also want your money back. However, if another friend steps in and says that they will pay you back if your other friend can’t, then you’re far more likely to buy the concert ticket. After all, you’re getting your money back either way, regardless of which friend pays you.  

This is more or less what a guarantor does. They are the second friend who steps in to pay back a loan in the event that you can’t, and big lenders, such as banks and mortgage providers, love nothing more than having that friend on standby! 

Therefore, unless you have a sparkling credit history and high income, it’s highly likely that you will be asked for a guarantor when you apply for a big-ticket loan.

Who can and can’t be a guarantor?

It’s common for lenders to attach some stipulations as to what kind of person can act as your guarantor. The minimum requirement for a guarantor is someone who is over 18, lives in the UK and who has a regular income. But beyond that, it will depend on the lender and their own set of rules. 

For instance, some lenders require that the guarantor is over 21 years old and earns above a certain amount of money. They may also stipulate that the guarantor must be a homeowner and have a good credit score. So your nominated guarantor might be a homeowner, but if their credit score is bad, then they may also be rejected on those grounds. That’s why it’s important to contact your individual lender(s) and get a full rundown of their prerequisites. 

By the same token, some people will not be eligible to be your guarantor, such as people who are retired, or who live outside of the UK. 

In the event that you cannot find your own guarantor, there are some charities which may be able to help you. Places such as Shelter.org, can sometimes act as guarantors on your behalf, if you meet their criteria. So this is something worth checking out, if you are unemployed or on a very low income. 

What is a guarantor responsible for?

A guarantor is responsible for paying back your loan or other expenses when you can’t. Your guarantor will sign a legally binding contract with the lender and agree to pay, in the event that you default on your repayments. 

Obviously, nobody wants to call upon their guarantor but, if you do need to use them, they will be asked to step in and make your repayments, until such point as you can return to this responsibility yourself. 

However, the good news is that no landlord or lender can increase fees for using a guarantor. Furthermore, they can’t charge extra for things such as credit checks or guarantor agreements. So neither you nor your guarantor should incur extra costs for these services.

What information does a guarantor need to provide?

Every lender will have a different set of criteria as to what information a guarantor needs to provide. But as a general rule of thumb, a guarantor will need to submit identification, proof of address, proof of income and, possibly, evidence that they own a home and or any other assets. 

A lender may also carry out a ‘soft check’, which is a background and credit score assessment that will not affect the guarantor’s overall credit rating. 

Again, it’s important to know what each individual lender requires, so we always recommend getting in touch with them directly. 

Next steps for finding a guarantor

As we’ve seen, there are many times where you might need a guarantor. And although you know that when it comes to paying back your loan, rent or mortgage you’ll do your very best to keep up with payments, sometimes lenders need a bit of extra persuasion.

By choosing a great guarantor that fits with your lender’s criteria, you should have no problem securing that next loan. Just make sure you know who is eligible to be your guarantor, what’s expected of both of you and what information a guarantor needs to provide to be accepted. And if you need a refresher, simply come back to this guide for all info you need on being a guarantor in the UK.