Guarantor

What is a Guarantor?

A Guarantor is someone who agrees to pay a loan or routine payment (e.g. rent) on your behalf if you miss a payment. This person is usually a parent or relative- someone close. If they do have to pay, they acquire rights to sue you to reclaim their losses.

If you are having trouble finding a loan provider or mortgage lender willing to lend as much money as you need (either because your salary is low, you already have a lot of debt or you’re buying property in an expensive area) you might find they become more amenable if you can provide a suitable Guarantor.

Once the deal has been signed, a Guarantor is legally-bound and they can be made to pay out at any time during a mortgage or loan term even if it means selling their own home. For that reason it has come under a lot of scrutiny recently and has become subject to tighter regulations, with affordability assessments now needed to be carried out on Guarantors to ensure they can cope with the additional burden.

If you are thinking of agreeing to be a guarantor, think carefully. Unless you are very, very sure of the person you are being asked to guarantee, the best advice is to stay well clear.


Q: What is required to be a guarantor?

A: To be acceptable to a lender, a Guarantor must prove they can handle the additional cost of the loan (should the borrower miss payments) on top of their current monthly obligations and expenditures.

Q: Is it easy to stop being a Guarantor?

A: The lender is unlikely to agree to release a Guarantor from an agreement unless the borrower finds an acceptable replacement, or their salary or the value of their property has risen significantly.

Q: Does being a guarantor affect my ability to apply for credit?

A: It can. Once you agree to become a guarantor for someone, their loan/ mortgage repayments are factored into your affordability too. In essence your new lender will be asking ‘can they afford their current payments, to cover someone else’s loan and our extra repayments combined?’

Jargon Buster

Use the links below and the resulting list of terms on the right to locate the term you are looking for. If you can't locate it, please get in touch.

A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
keyboard_arrow_left

keyboard_arrow_right

We have loads of great customer reviews