We aim to make our website as accessible as possible. However if you use a screen reader and require debt advice you may find it easier to phone us instead. Our phone number is 0 8 0 0 1 3 8 1 1 1 1. Freephone (including all mobiles).
StepChange Debt Charity logo

Guarantor loan debts. How to deal with them.

A guarantor loan is when someone else, such as a family member or friend, agrees to repay the loan if you can’t afford the repayments.

Guarantor loans are usually marketed at people who have bad credit or have been turned down by other lenders.

Interest rates for many guarantor loans are high, often around 50% APR or more. Larger loans are often paid back over a few years and this high interest means you could end up paying back more than double the amount you borrowed.

Because the loan payments are guaranteed by someone else, the debt is similar to a joint debt where both people are responsible for paying it back if one person can’t. This can cause problems if you’re unable to afford the loan as the guarantor becomes jointly responsible for the debt.

What happens if I can’t pay a guarantor loan?

If you fall behind with a guarantor loan or can’t afford to pay it, the lender will ask you to catch up with payments. If you don’t do this the account will default and the lender can then ask the guarantor to make the repayments.

The debt will be dealt with using the normal debt collection process which could involve the debt being passed to a collection agency or court action being taken.

This places a significant risk on the guarantor, as they’ve agreed to repay the debt if you can’t. Any impact that the loan has on your credit file will affect both of you, in the same way as a joint debt.

If a family member or friend is your guarantor, the impact of them having to pay the debt could cause relationship problems, stress and financial difficulties.

Need help with a guarantor loan debt?

Try Debt Remedy

Free online debt advice in 20 mins

Get debt help

Is a guarantor loan right for me?

Although this type of bad credit loan might seem a good option for people who are looking to improve their credit file, it’s important that you and the guarantor are fully aware of the risks involved.

You should be aware of the cost of the debt and interest rates, as these can be quite high and lead to further problems. If you’re looking at a guarantor loan to consolidate existing debts there may be other, more affordable options available to you.

Need help with a guarantor loan?

If you’re struggling to repay a guarantor loan, or you’re looking for help dealing with your debts, we can help. Use our free Debt Remedy tool to look at all of your available options and give you expert advice for your situation.

Helping you become debt free...

“I wish to thank your staff for all the great help they gave me when I was in so much debt.
They were a pillar of support to me.” (Leslie, Essex)

Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

We link to external websites where they contain relevant information for our visitors. We're not responsible for the content of these websites, or any infringement on your data rights under data protection regulations by any external website provider.

*This is the average rating of our service based on the StepChange reviews on Feefo by DMP and DRO clients three months into their solution.

© StepChange Debt Charity 2018