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What Does It Take to Be a Loan Guarantor?

question on loan guarantorHave you been asked to act as a guarantor for someone’s loan? Are you wondering what a loan guarantor does?

Of course, we will answer your questions regarding this subject in this blog post. But, first, let me tell you that being a loan guarantor takes some balls. It’s a must to weigh the consequences of taking this role, especially if you don’t fulfill your obligations of being a guarantor. One of these risks is hurting your credit score. 

You’re in the right place before making your big decision: to be or not to be a loan guarantor? Here’s a guide to help you regarding this matter. 

What’s the Responsibility of a Loan Guarantor?

If everything goes smooth - which means if the borrower pays his/her debt on time - the guarantor does nothing at all. The role of the guarantor, after all, is to guarantee that there’s someone who’s going to pay for the loan if the borrower doesn’t or can't pay it. 

In the case of the borrower missing payments or defaulting on the loan, the passive role of a guarantor turns active. He/she will now shoulder the failed obligation of the borrower. Based on the contract, the lender may request the guarantor to continue making the payments for the loan.

The guarantor should follow the terms of the guarantee if the borrower misses making a single payment or the entirety of the loan. If the guarantor won’t continue paying the debt, his/her credit score will get dragged down. That’s the harsh reality of being a loan guarantor. 

Why a Lender May Require the Borrower to Have a Loan Guarantor?

A lender may ask the borrower to get a guarantor for the loan for various reasons, namely:

  • The borrower hasn’t experienced borrowing money in the past (no credit history).
  • The borrower has bad credit or a history of missing payments. 
  • The borrower doesn’t have a sufficient monthly income required for getting the loan. 
  • The borrower owes other debts. 

Who Can Be a Loan Guarantor?

While lenders may differ in setting their requirements for a loan guarantor, we can nevertheless list down the most common of these qualifications. 

  • A would-be loan guarantor has to be 18 years of age and above.
  • A would-be loan guarantor needs to have a good or excellent credit score. 
  • A would-be loan guarantor must have a full-time job and meet the required monthly income. 
  • There must be proof that the would-be guarantor and the loan applicant aren’t married or have shared financial accounts. 

Is It Possible for a Loan Guarantor to Back Out of the Agreement?

As long as you haven’t agreed to any contract yet, you’re good to go. But once you have signed the terms of the guarantee, you can’t back out from your obligation. Thus, it’s crucial to think about it carefully before you decide to be a loan guarantor. You need to consider these questions below to help you make a decision. 

Can You Afford to Continue Making the Payments If the Borrower Can’t?

A loan guarantor must be financially confident in acting for this role, if not to say lots of guts. Think about the worst-case scenario. If you’re going to make the payments that the borrower failed to do, you should make sure that you can afford them. Also, take into account your other essential expenses, such as food or mortgage. 

Do You Know the Risk to Your Credit When You Miss Payments as a Guarantor?

Your credit won’t get affected by you simply being a loan guarantor. However, when the borrower can’t pay back the loan and you need to shoulder the obligation and you also fail to make payments, your credit score will get negatively affected by your action. So, always ponder this scenario before deciding to become a loan guarantor. 

Are You Aware That Your Assets Might Get Repossessed?

Besides hurting your credit score, the lender has the right to take legal action against you and repossess your house or other assets to cover the repayment on the loan. 

How Well Do You Know the Borrower?

You must know the borrower you’re guaranteeing. Make sure that he/she has the capacity to pay back the loan. Check his/her monthly income, assets, and financial resources. Moreover, you have to ensure that the borrower is serious about repaying the debt. You can’t just be a guarantor for someone’s debt if you don’t know that person well. 


Being a loan guarantor is a serious matter. If someone asks you to guarantee his/her loan, you must be aware of the responsibility and the consequences that come with this role. Keep in mind that you have to pay back the borrower’s debt if he/she failed to repay it. Moreover, if you can’t fulfill your obligation, your credit will get affected and the lender might repossess your assets to cover the payment for the loan. 

Author Bio:

Bree Diaz is a blog writer who tackles topics surrounding personal finance. She is well-versed in consumer loans such as secure online payday loan and guarantor loans. Bree is also a hiker and a dog lover.

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