Do you need a guarantor for your loan?

Stick man standing at a crossroads

Finding a suitable guarantor can at first seem daunting.

Before diving into asking people to be your loan backer, it is worth maximising your chances of success by thinking about things first, and planning your approach.

We look at some of the things you need to think about to make this process easier.

1. Think of people who trust you

The most common people to act as guarantors are those who trust you most, and these are usually family members such as parents, aunts or uncles, cousins, brothers or sisters, and grandparents.

Though they could also be close friends, work colleagues, or anyone else you have a close relationship with.

Trust is important, as even with the best presentation showing how you can afford the loan if someone does not trust you before raising the idea, even asking them will be a waste of time.

2. Think of people who meet the criteria

There is criteria that your guarantor must meet, so before you approach someone, you must decide if they meet the following:

  • A resident of the UK and 18 to 75 years old
  • A homeowner or tenant, though loans to those with homeowner guarantors are cheaper
  • Clean credit rating or only slightly imperfect
  • Have a current debit card and UK bank account
  • Have a regular income, either employed or a pension

You may not know that answers to all the above, but it is worth thinking about it beforehand.

3. Try and think of more than one person

It is always a good idea to try and have more than one person on your list, as there may be many reasons why the people you ask may say “no”.

The more people you have on your list, the greater chance you have of finding someone who will say yes; plus it places less pressure on you when you are speaking to people.

4. Plan your finances

People are much more likely to give you a positive response if they believe you have really thought about things, so before you approach anyone thinks about:

a. Why you need the money

We can all think about good or bad reasons for a loan.

For example, a good reason maybe replacing your broken heating boiler during mid-winter, whereas a bad reason may be a skiing holiday etc., though of course, everyone’s good or bad reasons may be different!

If you have a good reason to need a loan, the person you are asking to be your guarantor is much more likely to say yes.

b. How much money you need

It is sensible to borrow the minimum amount possible, as borrowed money incurs interest which you have to pay back. So be prepared to answer questions as to why you need to borrow the amount you are asking to.

Using our broken boiler example, this is simple, you get three quotes for replacing the boiler, and pick the amount of money that is most likely to get the job you want.

If you were getting the loan in this example, why not show your prospective guarantor the three quotes you have received?

c. How much you can afford

It is critical that you can afford the loan you are proposing to get.

Firstly, use our Loan Calculator to estimate monthly repayments.

Then use the Citizens Advice Bureau’s Budget Sheet to write down your income, expenses plus any other debts to satisfy yourself that you can afford the repayments.

If you cannot afford the loan, please do not try and kid yourself that you can. Looking into the future, if you get the loan then start missing loan repayments your guarantor is not going to be very happy.

5. Know the implications of being a guarantor

Even if someone does trust you they will want to know the full implications of being a loan guarantor. The more knowledge they have the greater the chance they will say “yes”.

6. Be prepared for “no”

You must prepare yourself that one, or a number of people that you ask may say “no”.

There may be very good reasons for this

  • They do not meet the criteria
  • If you could not pay the monthly repayments, they could not afford them either
  • They might be looking to get credit in the near future and are worried by the implications
  • They might just not feel comfortable doing it
  • And more…

Asking someone to be your guarantor is a major thing to ask.

If you follow steps one to five you are increasing the chances that someone will say yes, but ultimately it is their decision and you should respect that, and never put someone under pressure to do something that they do not want to.