Owing on a guarantor loan you never signed

A guarantor loan is a loan a lender will only provide if another person, often a friend or relative, guarantees to make the payments if the borrower does not¹. If you are being chased for one of these loans and you never agreed to stand behind it, the starting point is simple: a guarantee only binds you if you actually agreed to it. The Financial Ombudsman Service, which decides disputes between consumers and lenders, looks at whether the lender "obtained the guarantor's agreement" before it agreed to you being a guarantor¹.

That matters because the sums involved are not small. Depending on the terms of the agreement, a guarantor may become liable to pay back everything owed, not just the payments the borrower has missed². A default on a guarantor loan is recorded on both the borrower's and the guarantor's credit files³. And once a loan has been paid out, the lender's own guidance is that you cannot simply remove yourself as guarantor⁴.

Where the guarantee was never properly agreed, or was obtained by pressure or by misleading you, there is a route out. Complaints about guarantor loans go to the lender first and then to the ombudsman, and where the ombudsman upholds a complaint it can order release from the guarantee, a refund of payments made with interest, and the removal of information added to your credit file¹.

A guarantor is only liable if they agreed to the guarantee

The whole arrangement rests on consent. MoneyHelper describes a guarantor as someone who guarantees a loan for someone else, agreeing to pay it back if the other person cannot⁷. The ombudsman's own description is the same: some lenders will only provide a loan to borrowers if another person, for example a friend or relative, guarantees to make the payments if the borrower does not¹.

Two consequences follow. First, the liability is potentially the whole debt, not a top-up. National Debtline states that depending on the terms of your agreement, the guarantor may become liable to pay back everything that you owe, not just the payments you have missed². Second, the guarantee survives the borrower's own difficulties: where a borrower enters bankruptcy, a debt relief order or an individual voluntary arrangement, their liability is included in the formal arrangement but the guarantor remains fully liable and is expected to maintain the original repayments⁸.

If your name is not on the credit agreement and you did not sign or act as guarantor, you are generally only responsible for your own debt, and cannot be chased for someone else's⁹. That is the principle to hold on to when a lender or a debt collector contacts you about a loan you do not recognise.

What guarantors are normally asked for before a loan is approved

Lenders do not accept a guarantor casually, and the checks they are meant to run are the same ones a complaint will examine. In general a guarantor must have a good credit history, be at least 21 years old, or 18 in some cases, and live in the UK⁷. They also need a separate bank account from the borrower⁷, and usually must not be financially connected to the borrower, such as a spouse or partner⁸.

Beyond that, requirements vary by lender. A lender might ask for proof that the guarantor is working, proof of income, or that the guarantor is a homeowner⁷. Debt advice services describe the typical expectations as a good credit history and a separate bank account¹⁰. Anyone considering the role is advised to get independent legal advice and to talk to a mortgage adviser before agreeing¹¹.

The checks run both ways. Lenders need to make sure the borrower can afford the repayments without too much trouble, and must be able to show what checks they did if the loan is later complained about as unaffordable¹. A guarantee given without any of this groundwork is exactly the kind of case the ombudsman looks at.

Pressured into it or never told the risks: grounds to be released

Pressure is not a grey area here. MoneyHelper states plainly that if your partner or a family member is pressuring you to act as a guarantor for a loan, this is financial abuse⁷. HSBC says the same, describing pressure to act as a guarantor as a form of financial abuse⁴.

Being misled is a separate ground. In the rented housing sector, where guarantees are also common, a landlord might not be able to use a guarantee if the guarantor was pressured or misled into signing, and a court can decide whether it is still in place if that is not clear¹³. The same logic applies to a credit guarantee: a signature obtained by pressure or by a false account of what was being signed is not a freely given agreement.

There is also the question of whether the lender should have accepted you at all. The ombudsman examines whether the lender completed reasonable and proportionate checks before it lent to the borrower and agreed to you being a guarantor, and whether it obtained your agreement¹. If the answer to either is no, the guarantee itself is in question.

Complaining to the lender and then the Financial Ombudsman

The route is fixed and it is free. Talk to your lender or broker first, because they need to have the chance to put things right¹⁴. If the lender does not uphold your complaint, or does not acknowledge it, you can escalate it to the Financial Ombudsman Service¹⁵.

The ombudsman handles a wide range of credit complaints, including cases where consumers feel they were given unaffordable credit or that the lender acted irresponsibly in providing the product¹⁶. It also deals with credit broking complaints, which commonly involve being charged a fee for finding a loan, sometimes without getting a loan at all, fees not being refunded when no loan was taken out or offered, and being misled or not correctly informed about the loan's terms or cost¹⁷.

For guarantor cases specifically, the ombudsman receives complaints from borrowers and guarantors, and its assessment turns on the checks the lender made and whether your agreement was obtained¹. Complaints about loans to businesses are outside that page's scope¹.

The ombudsman's own account of the route is that the lender or broker needs the chance to put things right first, so a complaint goes to them before it goes anywhere else¹. Where a lender does not uphold a complaint, or does not acknowledge it, the complaint can be escalated to the Financial Ombudsman Service¹. Complaints the service handles include unfair charges such as arrears fees, legal costs and field agent visit fees, a refused concession such as a temporary switch to interest-only or a term extension, a lender trying unfairly to repossess a house, unaffordable payments where the mortgage company will not help, and harassment about arrears¹. Consumers who feel they were given unaffordable credit, or that the lender acted irresponsibly in providing the product, may be able to complain¹. Where a mortgage shortfall is involved, a complaint can be made if the lender's handling is unsatisfactory, including where the five-year written notification was not given¹.

Being released: refunds with 8% interest and a cleaned credit file

Where the ombudsman decides the guarantor should not have been accepted, the remedy is concrete. It will usually say that the guarantor should be released from the guarantee, that any payments made already should be refunded to the guarantor, and that information added to the credit file should be removed¹. Where the complaint is that the borrower should not have been given the loan, the remedy is a refund of any interest and charges paid, with interest, and removal of adverse information from the credit file; if a balance remains, all interest and charges are removed so the balance is only what was lent, deducting payments already made, with any overpayment refunded with interest¹. Where a loan was unaffordable, the refund is any interest paid plus 8% statutory interest¹.

Where the complaint is that the borrower should not have been given the loan in the first place, the ombudsman's approach is to require the lender to refund any interest and charges paid, with interest, and to remove any adverse information recorded on the credit file. If there is still a balance outstanding, it will require all interest and charges to be removed so the balance is only what was lent, deducting payments already made, with any overpayment refunded with interest¹.

One consumer rights service summarises the position on unaffordable loans as a refund of any interest paid plus 8% statutory interest¹⁸. The ombudsman has ordered comparable outcomes in other credit cases: in a logbook loan complaint it said the lender should refund the interest and charges the borrower had paid, waive those outstanding or due in the future, amend the credit file, stop recovery action, and treat the car as the borrower's full ownership¹⁹.

If the lender is chasing you or threatening court action

Threats are not the same as rights. If a lender is not licensed by the FCA, it has no legal right to recover the debt⁶. Not repaying a loan from an unlicensed lender is not a crime, so prosecution and prison threats cannot happen⁶. Warning signs of an illegal money lender include being offered a cash loan, no paperwork, huge amounts of interest or APR added, threats, fear of people finding out, and bank cards, benefit cards, passports, watches or other valuables being taken²⁰.

For a properly authorised lender, the picture is different but still bounded. On an unsecured loan, your house is not immediately at risk if you fall into arrears, although the lender can take court action to make you pay the money back²¹. Legal action typically follows missed payments: if you do not contact your lender or you miss up to three payments, your lender may start legal action against you²². Acting as guarantor and not paying could result in legal proceedings, which could affect your credit score²³.

If you are being chased, the practical steps are to ask the lender in writing for the agreement you are said to have signed, and to raise a formal complaint if it cannot produce one. Free and impartial help is available from MoneyHelper and from debt advice charities, and the Financial Ombudsman Service decides disputes once the lender has had its chance to respond¹⁴.

What happens to the loan if you are removed as guarantor

Release ends your liability, not the loan. If the borrower fails to make payments, the guarantor is legally liable to pay back the loan for them⁷, so removing that liability leaves the borrower responsible for their own borrowing. The lender can still pursue them.

It is worth being clear about the default position, because it explains why a complaint is often the only route. Once you have signed an agreement and the loan has been paid out, you cannot remove yourself as the guarantor⁴. Experian's guidance says the same: once you have signed a loan agreement and the loan has been paid out, you cannot get out of being a guarantor²⁶. Release therefore normally comes from the lender agreeing, or from the ombudsman ordering it, rather than from a change of mind.

If a borrower asks for a debt to be written off, a guarantor will usually be asked to repay the debt instead⁸. That is the point at which many guarantors first discover the extent of what they signed.

Where the protection stops

The ombudsman can order release, refunds and credit file corrections, but it cannot rewrite a guarantee you freely gave. If the checks were reasonable, your agreement was properly obtained, and the borrower simply stopped paying, the liability stands.

Two limits are worth knowing. First, the ombudsman's guarantor loan guidance does not cover complaints by guarantors of loans to businesses¹. Second, acting as guarantor for a partner's debt does not usually create a financial association on your credit report, but the lender can pursue you if the partner fails to pay and your credit report can still be affected⁹.

On the credit file itself, being a guarantor will not affect your credit rating as long as the borrower pays back the debt on time, but payments made on their behalf are added to your credit history and could reduce your credit score⁷. The lender will also run a soft credit check on the guarantor, which is not visible to other companies and does not affect your credit score⁷.