How guarantor loans work
With a guarantor loan, a friend or family member agrees to make the repayments if you can't. It's aimed at people who struggle to borrow because of a poor or short credit history.
Guarantor loans usually have much higher interest rates than mainstream personal loans, so compare the total cost carefully.
Worked example
Borrowing £5,000 at 25% over 3 years costs £198.80 a month, £7,156.77 in total, of which £2,156.77 is interest.
Interest is worked out monthly at one twelfth of the annual rate. Lenders may calculate interest differently (some charge it daily), so your actual payments can differ slightly.
What it means for the guarantor
The guarantor is legally responsible for the debt if you don't pay, and the lender can chase them for it. They should only agree if they could afford the repayments themselves.
Inputs for the guarantor loan calculator
Amount to borrow
The amount you want to borrow.
Interest rate (per year)
The annual interest rate on your loan. The rate shown is only an example, so enter the rate from your quote.
Term
How many years you'll repay over.
CALCULATOR QUESTIONS
Guarantor loan calculator questions
What does a guarantor have to do?
Make the repayments if the borrower doesn't. The lender can pursue the guarantor for the debt.
Why are guarantor loan rates high?
They're designed for people with poor or limited credit history, which lenders see as higher risk.
Can a guarantor pull out?
Usually not once the loan has been taken out, so guarantors should be sure before signing.
Are there cheaper alternatives?
Possibly, such as a credit union loan. Compare the total cost before deciding.