A guarantor loan is a type of unsecured loan where someone else, usually a friend or family member, agrees to pay the loan if you can’t afford to make the repayments.
Your friend or family member will have to co-sign the credit agreement in order for the guarantor loan to be accepted. This means that if you fall behind with repayments, the lender can ask the guarantor to make the repayments instead.
How it works is a guarantor loan is initially paid into yours or the guarantor’s bank account, then you will need to make each repayment directly to the lender.
If you’re turned down for an unsecured loan because of a low credit score, a guarantor loan is an option you could take.
However, you must be confident that you can repay the loan back, because if you struggle to make repayments it would have serious financial consequences for your friends and family members.