Guarantor loans and personal loans are two common ways to borrow money in the UK, but they work in different ways and are designed for different types of borrowers.
Back to the Blog!A personal loan is typically based on the borrower’s own credit history, income and financial circumstances. In contrast, a guarantor loan involves a second person – known as the guarantor – who agrees to cover the repayments if the borrower cannot.
Because of this additional security, guarantor loans are sometimes used by people who may find it difficult to obtain credit through traditional lenders, such as those with poor credit history or limited borrowing experience.
At Guarantor My Loan, we specialise in guarantor loans and regularly assess applications from borrowers who may have struggled to obtain credit elsewhere.
What Is a Personal Loan?
A personal loan is a type of unsecured borrowing that allows individuals to borrow a fixed amount of money and repay it in instalments over a set period of time.
Most personal loans are offered by banks, building societies and online lenders. Approval usually depends on the borrower’s credit score, income and financial stability.
Typical features of personal loans include:
- Fixed loan amounts and repayment terms
- Monthly repayments over an agreed period
- Credit checks to assess the borrower’s financial history
- No requirement for a guarantor or security
Borrowers with strong credit histories and stable income are usually more likely to be approved for personal loans.
What Is a Guarantor Loan?
A guarantor loan is similar to a personal loan but includes a second person in the agreement.
The guarantor agrees to cover the loan repayments if the borrower is unable to do so. This additional reassurance can make lenders more willing to consider borrowers who might otherwise struggle to obtain credit.
Guarantor loans are often used by people who:
- Have poor credit history
- Have been declined for traditional loans
- Have limited borrowing history
- Need help accessing credit from specialist lenders
At Guarantor My Loan, applications are assessed by considering both the borrower’s financial situation and the guarantor’s ability to support the loan if necessary.
Key Differences Between Guarantor Loans and Personal Loans
Although both types of borrowing provide access to funds, there are several important differences between guarantor loans and personal loans.
| Feature | Guarantor Loan | Personal Loan |
| Guarantor required | Yes | No |
| Credit requirements | Often more flexible | Usually stricter |
| Approval factors | Borrower and guarantor assessed | Borrower assessed alone |
| Typical borrowers | People with lower credit scores | Borrowers with strong credit |
| Loan structure | Unsecured but guaranteed by another person | Usually unsecured |
Because of these differences, guarantor loans may be considered by borrowers who have difficulty qualifying for traditional personal loans.
Which Loan Is Easier to Get Approved For?
Approval depends on a borrower’s individual financial situation.
For people with strong credit scores and stable income, personal loans from banks or mainstream lenders may be easier to obtain.
However, borrowers with lower credit scores or limited credit history may find guarantor loans more accessible because the guarantor provides additional reassurance to the lender.
A suitable guarantor can sometimes improve the chances of approval where a personal loan application might otherwise be declined.
Who Can Be a Guarantor?
A guarantor is usually a trusted friend or family member who agrees to support the loan.
Most lenders require guarantors to:
- Be over 21 years old
- Have a good credit history
- Be financially stable
- Be able to afford the repayments if necessary
The lender will review the financial circumstances of both the borrower and guarantor before approving the loan.
Advantages of Guarantor Loans
Guarantor loans may offer several benefits for borrowers who struggle to access traditional credit.
These may include:
- Greater approval chances for people with poor credit
- Access to larger loan amounts than some short-term credit products
- The opportunity to rebuild a positive credit history
- Structured monthly repayment plans
For borrowers who have been declined by banks or mainstream lenders, guarantor loans can sometimes provide an alternative option.
Things to Consider Before Choosing a Loan
Both personal loans and guarantor loans involve financial commitments, so it is important to consider which option is most suitable.
Key considerations include:
- Your credit history and likelihood of approval
- Whether you have a suitable guarantor available
- The affordability of monthly repayments
- The responsibilities the guarantor would take on
Borrowers and guarantors should fully understand the terms of the loan before agreeing to the arrangement.
At Guarantor My Loan, we carry out affordability checks to help ensure the loan is suitable for both parties.
FAQs
Is a guarantor loan the same as a personal loan?
No. A guarantor loan involves a second person who agrees to cover the repayments if the borrower cannot, while a personal loan is assessed based only on the borrower’s financial circumstances.
Do guarantor loans require a credit check?
Yes. Lenders usually check the credit history of both the borrower and the guarantor as part of the application process.
Can a guarantor loan help improve your credit score?
If the loan is repaid on time, it may help build a positive repayment history on the borrower’s credit file.
Which loan has lower interest rates?
Interest rates vary between lenders. Personal loans for borrowers with strong credit scores may offer lower rates, while guarantor loans may be available to borrowers who would otherwise struggle to access credit.
Final Thoughts
Guarantor loans and personal loans both offer ways to borrow money, but they are designed for different financial situations. Personal loans are usually suited to borrowers with strong credit histories, while guarantor loans can provide an alternative option for people who may struggle to access credit through traditional lenders.
By including a financially stable guarantor in the agreement, lenders may be able to consider applications that might otherwise be declined.
If you are exploring your borrowing options, Guarantor My Loan can review your application and help determine whether a guarantor loan may be suitable for your circumstances.