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A guarantor is someone in a strong financial position who is willing to support your personal loan application. The guarantor is usually a family member, and they essentially put themselves forward to pay your loan if you can't.
If you apply for a personal loan with a guarantor then this increases your chances of getting the loan approved.
You might be able to borrow more or secure a lower interest rate if you apply with a guarantor.
But if you can't repay the personal loan, your guarantor may be forced to.
Entering into a guarantor agreement for a loan is never without risk, but most of the risk really lies on the guarantor. The guarantor should seek legal advice and understand exactly what kind of arrangement they are entering into.
For both parties, it's important to get legal advice before signing a loan contract. And it's important to understand that entering into a guarantor agreement can put strain on your relationship if the borrower can't repay the loan.
Being a guarantor on someone else's personal loan won't harm your credit score if the borrower is making repayments. But the lender will request a copy of both your credit reports.
And if the borrower defaults then this could harm your credit score too.
And while a guarantor arrangement won't necessarily hurt your credit score, it could make it harder for you to get a loan approved yourself.
There are no specific guarantor loan products. A guarantor arrangement is something lenders typically offer on their personal loan products and assess on a case by case basis.
Every lender is different but it's possible to get most personal loan types with a guarantor:
With a secured personal loan the borrower typically offers an asset (usually a car) as security. But if a guarantor is willing to offer something as security instead you may be able to get a secured loan with a guarantor. Secured personal loans have lower rates than unsecured loans.
An unsecured personal loan has no asset attached to it. These loans are more flexible and often easier to get but do have higher rates. You could get an unsecured loan with a guarantor. The guarantor would not have to put a car or property up as security but they'd still be liable to repay the loan if you can't.
The amount you're able to borrow with a guarantor depends on your financial situation, your credit score, the type of loan you're applying for, your guarantor's financial situation and the lender's own lending criteria.
In general, having a guarantor on your loan makes it easier to borrow more than you could alone. But the lender still needs to be satisfied that you can afford the repayments.
Use a personal loan calculator to check you can afford the loan's repayments. Be sure to factor in both the interest rate and loan fees.
A guarantor for a loan is usually a parent or family member. Some lenders may accept a friend as a guarantor but check this before applying.
For most lenders a personal loan guarantor needs to:
If you're applying for a secured personal loan the guarantor needs to provide a suitable asset. For most lenders this is usually a car that is under 7 years old and registered in the guarantor's name.
But some lenders may accept other assets as security.
While most lenders, from big banks to online lenders, accept guarantors on personal loan applications, they aren't always upfront about it.
For many lenders, guarantors are accepted on a case by case basis. It's worth checking if a lender allows guarantors before submitting a full application.
To become a guarantor you will need to:
You should also seek legal advice before signing a guarantor agreement.
Every lender asks for different information, but most of them require very detailed information about your personal and financial circumstances.
This includes:
There are a few ways to get out of a guarantor arrangement.
You may be able to guarantee part of the loan rather than the entire amount. By limiting the amount of the loan you're guaranteeing, you can support the borrower's loan application and then be free once the borrower has paid back an agreed amount.
The lender has to agree to this arrangement, and it might not be possible on smaller loan amounts.
If a bank turned you down for a personal loan, a smaller lender with risk-based pricing might lend to you without a guarantor. These lenders set loan rates based on a borrower's risk profile and creditworthiness.
This means you have a better chance of getting a loan on your own. But you will end up with a higher interest rate.
In a similar way, peer-to-peer loans match borrowers to sources of finance and they also have risk-based pricing. Again, you'll pay a higher rate but your chances of approval are probably higher.
If you have the option to wait before applying for credit, you might be better off improving your credit score and applying for a loan without a guarantor.
You could also increase your chances of getting a loan by borrowing a smaller amount.
OurMoneyMarket offers personal loan solutions for whatever your need. Whether you want to buy a new car, pay for your wedding or renovate your home, you can choose between secured and unsecured loan options.
Are secured personal loans better than unsecured personal loans and how do they work?
Find out more about Pepper Money's no fee personal loan and benefit from a competitive rate from 6.95% p.a., zero fees and loan terms of up to 7 years.
Not sure how much you can borrow based on your income? If you're looking for a personal loan, find out how lenders determine how much you can borrow and how to see if you're eligible based on your income.
How you can save by switching personal loans.
If you are looking for a credit card that gives access to a limited balance transfer offer, Visa and dining benefits, look no further than the Citi Ready Credit.
Compare unsecured personal loans from some of Australia's top lenders. Find the best deal on rates, fees and features in seconds.
We’ve written about fixed rate personal loans and what their advantages are.
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Find a low interest loan by comparing your options with Finder. See interest rates, fees, and features for loans across Australia, plus guides to help you get the best deal.
Hi! I have been approved for a small loan through my work. The only problem is I don’t have a guarantor. I have no family or friends and I have only been living here for 12 months and don’t know anyone. So how and where can I find a guarantor?
Hi Kylie,
Thanks for getting in touch with Finder. I’m sorry to hear about your problem.
A guarantor can be anyone who is willing to take on your debt if in case you default on your loan. I can’t specifically tell you where you can find a guarantor since I’m not completely familiar with your situation. Perhaps, you can ask around and finally find someone who wants to be your guarantor.
If in case you can’t find a guarantor, you might consider getting a small payday loan. If this interests you, you can use our comparison table to conveniently compare fast small personal loans in Australia. You can compare based on the maximum loan amount, loan term, and costs, to name a few. Once you found the right one for you, click on the “Go to site” green button to learn more or initiate your application.
Please make sure that you’ve read the relevant T&Cs or PDS of the loan products before making a decision. Moreover, check the eligibility requirements as well and consider whether the product is right for you.
I hope this helps. Should you have further questions, please don’t hesitate to reach out again.
Have a wonderful day!
Cheers,
I’m looking for a bad credit personal loan and on centrelink, I have a guareentor but having trouble finding places that will help me.
Can you plz tell me who will actually help me?
Hi Catherine,
Thank you for reaching out to Finder.
Payday and cash loans are available to Centrelink applicants as well as those with bad credit. You may refer to our list of lenders who offer bad credit payday loans. Kindly review and compare your options on the table displaying the available providers. Once you have chosen a particular provider, you may then click on the “Go to site” button and you will be redirected to the provider’s website where you can proceed with the application or get in touch with their representatives for further inquiries you may have.
Before applying, please ensure that you meet all the eligibility criteria and read through the details of the needed requirements as well as the relevant Product Disclosure Statements/Terms and Conditions when comparing your options before making a decision on whether it is right for you. Hope this helps!
Cheers,
Reggie
I would like to apply for a personal loan where I can also put down a guarantor.
Hi Demi,
Thanks for leaving a question on finder.
Everything you need to know on how to get approved for a loan with a guarantor is in this page you are in. If you have any other specific questions that is not in this guide, please send us a message anytime. :)
Cheers,
Joel
Hi, I am currently looking to apply for a personal loan I’m a single mother on the pension and I have recently become aware that my credit isn’t very good I have roughly $20,000 in assets and I am easily able to afford my loan repayments but unfortunately I don’t know anyone who can go as guarantor on the loan for me. I was wondering if you know of anyone who will legally sign as my guarantor on the loan please??
Hi Erin,
Thank you for your inquiry. I’m sorry to hear about your situation.
I’m afraid we don’t specifically know someone who can become your guarantor, but what we do have is a guide that discusses guarantor loans.
If you can’t find any guarantor, what you can do is decrease the loan amount you are planning to borrow to increase your chance of approval. Aside from that, you should get a better chance of getting approved if you choose bad credit personal loans or pensioner personal loans.
I hope this information has helped.
Cheers,
Harold
Hi,
Community first don’t accept a guarantor for personal loans where the applicant has a bad credit history. It seems that no lenders do. Have I missed something or is this article false?
Hi Dee,
Thank you for your question.
Please note each bank and lender will have different criteria based on the applications they will consider. You’ll need to get in contact with the lender you’re looking to apply with to confirm your eligibility. With this in mind, you can go through the lenders featured on this page or you can also check our bad credit history to check other options.
I hope this information has helped.
Cheers,
Harold