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Guarantor Personal Loans

If you’re worried that your personal loan application won’t be approved, a guarantor can increase your chances of approval.

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Elizabeth Barry

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Bria Horne
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Data updated regularly
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Service Fee Monthly Repayment
Community First Credit Union Fixed Personal Loan
Community First Credit Union Fixed Personal Loan

From 11.99% (fixed)
12.28%
$3,000
1 to 5 years
$195
$0
More Info
You'll receive a fixed rate from 11.99% p.a. ( comparison rate 12.28% p.a. )
Redraw available, no penalty for early loan repayment and lump sum repayments allowed.
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A guarantor loan is a type of personal loan that is backed by a family member or friend. This means that if the borrower defaults on the loan, the guarantor is fully responsible for repaying it. These loans should therefore not be taken on lightly, as they pose a big risk to the guarantor. Guarantor loans can help someone who would otherwise not be able to get a loan due to a lack of eligibility. You may find that you're ineligible to apply for a personal loan for various reasons; such as if you don't own any assets, are self-employed, or just turned 18 and have poor or no credit history. With a guarantor, a lender has a guarantee that your loan will be repaid, increasing your chances of getting a loan.

Generally, guarantors are required to have a good credit history and/or own their own home in order to qualify to guarantee your loan. If you have someone in your life that meets this criteria and is willing to go guarantor on a personal loan for you, a guarantor personal loan could help you get the funding you need.

What are guarantor personal loans?

A guarantor personal loan is a loan where someone agrees to be responsible for your repayments if you can't make them. They provide a guarantee that the loan will be paid even if you're not able to repay it. Having a guarantee makes your application less risky for a lender and it's more likely it will give you a loan.

Even if you don't meet the loan requirements, you could still apply for the loan if you have a guarantor.

A guarantor for a personal loan can be family, like your parents, legal guardian, grandparents, spouse, de facto partner or former partner. It can also be a company or a trust. Although it is rare, some lenders may also accept friends. Your guarantor will have to have a stable income, employment and a good credit score. They will also need to prove that they are financially able to repay your loan.

What type of guarantor personal loans are available?

Using a guarantor is an optional feature offered on some types of personal loans. To find out what type of guarantor personal loans could be available to you, see below:

  • Secured loans. This type of loan is often used to purchase a car, but it can also be taken to pay for other purposes. With a car loan, you could use your car as security for the loan. Alternatively, you or your guarantor could use an asset as collateral to apply for a secured personal loan. As this type of loan is less risky for the lender, you could get a more competitive interest rate. Do bear in mind that the guarantor is taking on additional risk if their asset is being used as security.
  • Unsecured loans. This type of loan does not require an asset as security from either you or your guarantor. As such, unsecured personal loans are more flexible, but have higher interest rates and tend to be more expensive. This is because the risk to the lender is higher than with a secured personal loan.
  • Overdrafts. An overdraft allows you to access extra funds from your transaction account. It allows you to draw up to an approved limit after you have used up the funds in your account. This can help you avoid overdrawn and dishonour fees. Interest will only be charged on the amount overdrawn.
  • Debt consolidation loan. You can apply for this loan to combine your existing debts or lower your costs on one debt. With this type of loan, you will be paying a single, and likely lower, interest rate. This can help you get out of debt faster.

How much can I borrow with a guarantor loan?

The amount you're able to borrow depends on a number of different variables:

  • What type of loan are you applying for? Generally, personal loans come with set minimum and maximum amounts. If you are eligible for one of these loans when applying with a guarantor, you should be able to apply for any amount in this range.
  • What do you want to finance? If you are looking to purchase an asset such as a car, you may be restricted to borrowing the value of the vehicle. If you’re borrowing to take a holiday or other personal expense, lenders may not approve you for as high a loan amount since the loan is more of a risk to them.
  • What financial situation are you and your guarantor in? Your income, credit history and employment situation will help lenders determine your capacity to manage your repayments and their own risk in taking you on as a borrower. Similarly, your guarantor’s financial circumstances play a part in this risk level if you are unable to repay your loan and they become responsible for your repayments. The higher your determined risk, the lower loan amount you’ll be approved for.
  • What lender are you applying with? Lenders have varying eligibility criteria, personal loan products and loan amounts available. Opt for a lender that offers you the loan amount you’re looking for to ensure you have a better chance of being approved for the loan you need.

How do I choose a guarantor?

Technically, just about anyone with a good credit history and/or who owns a property can opt to go guarantor for you. However, this will depend on the lender. Usually, all guarantors must meet the following criteria:

  • Are aged 18 or over
  • Are an Australian citizen or permanent resident
  • Have a stable income and employment
  • Have a good credit score
  • Be able to prove that you have savings or an asset to use as security against the loan
  • Not being in financial hardship

It should be noted that choosing the right guarantor is an important part of getting a guarantor personal loan. Some of the options to consider include:

  • A parent, grandparent or guardian. Getting a parent, grandparents or a legal guardian to go guarantor is one of the more common forms of guarantor personal loan. This may be a good option for you if your parent(s) are willing to do this for you.
  • Your sibling or relative. Siblings and other relatives can also be an option if you are looking for a guarantor.
  • An adult child. If your child meets the above criteria and is happy to go guarantor on a personal loan for you, this could also be an option.
  • A friend. A friend can sometimes go guarantor on a personal loan for you, depending on the lender. However, be aware that finances can cause a strain on relationships, so you should be absolutely certain that your friendship won't suffer as a result of an arrangement like this.
  • Your spouse or de facto partner. You can opt to have your spouse as a guarantor on a personal loan. However, rather than get your spouse to go guarantor, it may be more straightforward to opt for a joint personal loan. A joint personal loan will take into account both of your incomes and may enable you to access a greater amount of funding. However, eligibility for joint personal loans will vary from lender to lender.
  • A romantic partner. You don't have to be married or in a de facto partnership for your partner to go guarantor on a loan for you. Just be aware that your partner will be responsible for repaying the loan if you default.
  • A former spouse or de facto partner. Some lenders may not allow a former partner to go guarantor for you, but others might. It's best to check with your lender on this prior to submitting an application.
  • A colleague. Many lenders will likely not let someone that you don't have a personal relationship with go guarantor on a personal loan for you. However, this will depend on the lender. It may also depend on the seniority level of your colleague.

Does having a guarantor affect my eligibility?

If you are ineligible for a personal loan on your own, having a guarantor can increase the strength of your application. Having a guarantor, or someone who will take on your debt on your behalf, reduces the lender's risk of lending to you. You could also receive a more competitive interest rate. You may also be eligible for a higher loan amount than if you applied by yourself.

How do I become a guarantor?

To become a guarantor, you have to sign a guarantee. This is a legal contract which states your obligations, and the terms and conditions of the loan. It specifies the maximum amount you will have to pay if the borrower defaults. It may cover either the specific loan or all the loans given to the borrower, and your liabilities.

What does it mean to be a guarantor for a loan?

Being someone's guarantor means that you are agreeing to take on the responsibility of someone else's debt. In short, if the borrower defaults, you agree to pay the debt.

This means that there are potential financial and legal implications for you.

You may also be asked to put up your own assets, such as your car or house, to guarantee the loan. Your assets could potentially be at risk if the borrower fails to repay the loan.

It's important to know what you are getting into before you agree.

What are the risks of guarantor personal loans?

There are a number of risks involved with guarantor personal loans for prospective guarantors, these include:

  • Financial risk. You may have to pay back the entire or remaining debt. Your assets may also be at risk. If the debt amount exceeds the proceeds from the sale of assets, you will have to pay that too.
  • You cannot use your asset as security for another loan. In case you wish to apply for a loan, you will not be able to use the same asset as you use to secure a guarantor personal loan.
  • It could prevent you from getting a loan. The loan application will appear in your credit file, as will any defaults. Lenders will treat it as your liability. You will also have to mention your role as guarantor in your loan applications.
  • Your credit score could be affected. As much as your credit score can strengthen the borrower's application, any defaults will affect your credit score.
  • You could damage your relationship with the borrower. This should also be considered in your decision making process.
  • Your legal obligations will remain even if your relationship to the borrower changes. Even if your relationship with the borrower changes, you will still be obliged by the terms of the loan.

Are guarantor personal loans a good idea?

A guarantor loan can help someone who would otherwise not be able to get a loan. It may be for reasons beyond their control, such as age. They could also be self-employed or not own any assets.

If you're in a position to help someone out, and if you are comfortable with taking on the risk, then a guarantor loan may be a good idea.

If you are not comfortable acting as a guarantor, there may be other ways to help out. This can include offering direct financial assistance, if you're able.

What should I consider before agreeing to be a guarantor?

Before you agree to be someone's guarantor, you should ask yourself the following questions:

  • Am I satisfied that the person I'm guaranteeing can manage the loan repayments? You may want to seek independent financial advice to help you with this decision. You should take into account both the borrower's financial position and your own.
  • Am I willing to repay the loan if the borrower doesn't? Before you agree to guarantee a loan, you should look at your own finances to determine if you would be able to repay the loan if the borrower doesn't.
  • Am I willing to risk my assets? If you offer an asset as security, there is a risk it would be sold to pay for the loan if the borrower defaults. Even if you do not use your assets to secure the loan, the lender could take legal action against you.
  • Have I checked and understood the terms of the loan agreement? You should check if you are taking on a limited or unlimited guarantee. With a limited guarantee, you will only be securing part of the loan. The borrower will still receive the full benefits of the guarantor loan, but your risks are minimised. With an unlimited guarantee, you are securing the entire loan. You should also look into whether you will be notified if the borrower defaults on the loan.
  • Am I comfortable with the fact that the lender can take legal action against me as a guarantor? The lender can take legal action against you before they proceed with enforcement against the borrower. You will not be able to ask otherwise.
  • Have I understood the capacity under which I'm signing the guarantee? For instance, if you are a director, are you signing a personal guarantee? If you are part of a trust, is the guarantee limited to the trust assets?
  • Have I received legal advice before agreeing to be a guarantor? You can seek free legal advice before agreeing to be the guarantor. There are community legal centres and legal aid agencies in every state and territory. Details can be found on ASIC's website.

Can a guarantor be removed from a loan?

Yes, a guarantor can be removed from a loan agreement. You can choose to remove the guarantor or the guarantor can opt out:

  • Before the lender loans money. You must alert the lender in writing and let it know before it loans any money. The borrower will not be able to get the loan, but they will also not face legal or financial repercussions.
  • If there is a discrepancy with the loan agreement. If it is different to what the lender gave you before signing, you can opt out.
  • During the loan period. If the guarantor wishes to end their financial obligations during the loan period, they can do so if they:
    • Pay the lender what the borrower owes. This can include any further funds the bank has agreed to lend, but has yet to. This repayment will also be covered by the guarantee.
    • Pay the maximum amount. This is if the maximum amount is less than what the borrower owes. The guarantor can pay this to end their financial obligations.
    • Suggest another agreement. The lender will have to agree to this alternate agreement.

Can I get a guarantor loan if I have bad credit?

Yes, you can still get a guarantor loan if you have bad credit. Having a bad credit score is one of the main reasons people apply for guarantor personal loans. With a guarantor, your application will be viewed as less risky. This is because you have someone with a good credit score willing to take responsibility for the loan if you are unable to make repayments.

What are my other options?

If you don't have access to a guarantor, but you need a loan, there are other types of personal loans you can apply for. Because the risk of lending is high, it is likely that your interest rate will be higher. There may also be limitations in terms of how much you can borrow. You could apply for:

  • Risk-based loans. Most traditional banks now offer risk-based loans. But non-bank lenders specialise in this loan type. Lenders will offer you a rate of interest based on your risk profile. This means that if you are a low risk borrower, you will get a low interest rate. If you are high risk, your interest rate will be higher, making the loan more expensive.
  • No credit check loans. Some lenders offer loans without checking your credit score. However, the lender will account for other financial information. This will include your ability to repay the loan. As these loans pose a high risk, the interest rate offer will also be high.

How can I apply for a guarantor personal loan?

Once you've decided to take out a guarantor personal loan, you can start comparing loan options on Finder. Once you've found a loan that suits your circumstances and needs, click "Go to site" on your selected lender. You can then begin your application process. The eligibility criteria will vary from lender to lender. Please check the lender's specific criteria before applying.

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    14 Responses

      Default Gravatar
      KylieFebruary 21, 2019

      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?

      Reply
        Avatarfinder Customer Care
        JoshuaFebruary 24, 2019Staff

        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,

        Reply
      Default Gravatar
      CatherineDecember 8, 2018

      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?

      Reply
        Avatarfinder Customer Care
        JohnDecember 12, 2018Staff

        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

        Reply
      Default Gravatar
      DemiMay 9, 2018

      I would like to apply for a personal loan where I can also put down a guarantor.

      Reply
        Default Gravatar
        JoelMay 9, 2018

        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

        Reply
      Default Gravatar
      erinMarch 28, 2017

      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??

      Reply
        Avatarfinder Customer Care
        HaroldMarch 28, 2017Staff

        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

        Reply
      Default Gravatar
      DeeMarch 23, 2017

      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?

      Reply
        Avatarfinder Customer Care
        HaroldMarch 24, 2017Staff

        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

        Reply
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