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.