Acting as a guarantor

An adult with no credit history may find it hard to get a loan or a mortgage. 

Renting can be tricky for people who don’t have a credit file. If they’re late or miss payments for things like mobile phones or credit cards, it can impact their eligibility.

A way around these issues is to find someone to act as a guarantor. They take on the financial risk of a loan or rental agreement.

There are many legal considerations to think about before agreeing to become a guarantor.

What is a guarantor loan?

A guarantor loan is an unsecured borrowing loan taken out with someone else – usually a family member.  These loans typically carry higher interest rates. They’re usually aimed at people with a poor credit history or uncertain income, such as the self-employed, or people working on zero hours contracts.

If the borrower can’t pay back the loan, the debt falls on the guarantor who is then responsible for paying it back. It’s important to consider the legal practicalities before agreeing to become a guarantor. 

Who could be a guarantor?

To be a guarantor, you must usually be at least 21 and under 75 years old. You should also have a reasonably good credit history and be up to date with your credit commitments. Being a homeowner who can afford any repayments can also help your eligibility.

Who can you be a guarantor for?

If you meet the criteria and have no financial connection to the borrower, you can usually act as a guarantor for anyone. You can’t act as a guarantor for a spouse, civil partner, business partner or anyone you share a bank account with.

Borrowers must be at least 18 years old, with a UK bank account, and meet the necessary requirements to take out a guarantor loan or mortgage.

What to think about before you agree to be a guarantor

If the borrower can't keep up repayments or pay for property damages not covered by the deposit, you’ll be legally responsible to cover them. If you can't cover the payments, you could face legal proceedings. This may impact your credit score, making it difficult for you to get finance in the future.

If you act as a guarantor, you're legally responsible for the tenancy period or loan agreement term. You could damage a strong relationship with the borrower if things go wrong.

Signing the agreement form

Before signing make sure both parties receive a copy of the tenancy or loan agreement form, and understand any obligations or requirements. If you’d like to have a tenancy or loan agreement checked by a lawyer, you can find details of solicitors on the Law Society of Scotland website.

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