What a lender must tell and check on a guarantor

A guarantor is someone who agrees to pay back a loan if the borrower cannot. Before you sign, the lender has to check that you can afford it, not just the person taking out the loan. For a guarantor loan, the lender must do an affordability check for both the main borrower and the guarantor¹. The guarantor has to prove they can afford the repayments, based on their income, savings and any assets².

That check matters because the lender agrees to lend the money based on the guarantor being able to repay the loan in full². If the borrower fails to make payments, the guarantor is legally liable to pay back the loan for them³. Depending on the terms of your agreement, you may become liable to pay back everything owed, not just the missed payments⁴.

You also have rights. Under the FCA's CONC rules, a reference to a borrower includes an individual other than the borrower who has provided a guarantee or an indemnity in relation to a regulated credit agreement⁵. In practice, the guarantor has the same rights as the borrower under the credit agreement, including getting the same information before and after signing⁶.

The lender must check affordability for the guarantor too

The rule that a lender must check the guarantor's affordability is not a courtesy. For a regulated mortgage, a firm must assess whether the customer and any guarantor will be able to pay the sums due before entering into or agreeing to vary a regulated mortgage contract, and must not enter into the transaction unless it can demonstrate it is affordable¹⁰. That is the MCOB 11 responsible lending rule, and it applies to guarantors by name.

For guarantor loans, the same principle runs through the FCA's consumer credit rules. When a borrower applies for a guarantor loan, the lender must do an affordability check for both the main borrower and the guarantor¹. The lender needs to make sure the borrower can afford the repayments without too much trouble, and must show what checks it did if the loan is complained about as unaffordable⁷.

The check is not a formality you can wave through. The guarantor must prove they can afford the repayments, based on their income, savings and any assets². Some lenders go further and ask for proof that the guarantor is working, proof of income, or that the guarantor owns a home³.

If you are considering being a guarantor, official guidance suggests getting independent legal advice and talking to a mortgage adviser before agreeing to it¹¹. That is not a legal requirement in every case, but it is the safeguard the guidance points to.

What a guarantor loan affordability check covers

The affordability check looks at the guarantor's own finances, separately from the borrower's. The lender wants to see income, savings and any assets². It may also want proof of employment, proof of income, or that the guarantor is a homeowner³.

For a rent guarantor, the landlord or letting agent usually checks that the guarantor can afford to pay the rent¹². If a tenant fails an income, credit or reference check, they could offer to provide a guarantor¹³.

Some lenders have their own additional rules. A guarantor usually needs a good credit history and a separate bank account from the borrower¹⁴. For a guarantor mortgage, the guarantor will usually need to own a high proportion of their property outright¹⁵. A mortgage lender will either hold some of the guarantor's savings in a locked account, or take security over property, and will want a good credit history and evidence of legal advice¹⁵.

A guarantor loan can be a good solution for a borrower with a bad credit score or no credit history, such as a student or someone new to the country³. Finding a guarantor with a good credit history can help the borrower get better rates or a higher limit¹⁶. That is the borrower's benefit. For the guarantor, the trade-off is that the lender is relying on your ability to repay in full².

Is the lender's check on the main borrower enough to protect me?

No. The check on the borrower answers a different question: can this person repay? The check on the guarantor answers: can this person repay if the borrower does not? The lender agrees to lend based on the guarantor being able to repay the loan in full², so the two checks are separate and both are required¹.

That separation matters because the borrower's circumstances can change after the loan is made. The guarantor's liability does not. If the borrower fails to make payments, the guarantor is legally liable to pay back the loan for them³. Depending on the terms of the agreement, the guarantor may become liable to pay back everything owed, not just the missed payments⁴.

For a guarantor mortgage, the lender may secure the loan against the guarantor's property in some cases². Some lenders require the borrower to take out a 100% loan¹⁷. If the guarantor dies, the policy depends on the lender: some require the borrower to find a new guarantor, while others allow the borrower to pay off some of the mortgage with the guarantor's estate¹⁵.

Unfair terms in a guarantee: what the FCA can and cannot do

The FCA can act on unfair contract terms, but its powers have limits. The FCA does not have the power to grant redress to consumers who have suffered loss because a term or notice is unfair or insufficiently transparent¹⁹. It can, however, apply to court for restitution or require restitution where an unfair term also amounts to a rule breach causing loss to consumers¹⁹. It can also use its powers under section 404 of the Act to make rules requiring firms to establish and operate consumer redress schemes, and can impose a requirement on a firm to operate a scheme corresponding to a consumer redress scheme¹⁹.

The FCA is a designated public enforcer under Part 3 of the DMCCA, allowing it to act through seeking court orders which may include redress for breaches of consumer protection legislation including the Consumer Rights Act¹⁹. But the FCA cannot pay compensation or order a claims management company to compensate you, even if you have received poor service²⁰.

In practice, the FCA's use of these powers has been limited. The FCA's Unfair Contract Terms Library showed that the FCA has agreed just one undertaking with an insurance firm to address an unfair term in the previous six years²¹.

For a guarantee, the practical question is often whether the agreement is valid at all. A landlord might not be able to use a guarantee if the guarantor was pressured or misled into signing, and a court can decide if it is still in place if that is not clear²². For guarantor agreements entered into before 1 May 2026, the terms could be affected by the tenancy reforms in the Renters Rights Act, and landlords should review existing agreements and obtain the guarantor's consent to variations²³. Some agreements say the guarantor is only responsible for rent in a fixed term tenancy, so it is worth checking whether the guarantor is still responsible in a periodic tenancy²².

Complaints and redress when a lender gets it wrong

The Financial Ombudsman Service receives complaints about guarantor loans from borrowers and guarantors⁷. It looks at whether the lender completed reasonable and proportionate checks before lending to the borrower and agreeing to you being a guarantor, and obtained the guarantor's agreement⁷.

If the ombudsman decides the guarantor should not have been accepted, it will usually say the guarantor should be released from the guarantee. Any payments already made should be refunded, with interest, and information added to the credit file should be removed⁷.

If the problem is that the borrower should not have been given the loan, the ombudsman may say the lender should refund any interest and charges you paid, with interest, and remove any adverse information recorded on your credit file. If there is still a balance, it may say all interest and charges should be removed so the balance is only what was lent, deducting payments already made, with any overpayment refunded with interest⁷.

The ombudsman can also look at complaints about financial difficulties affecting your ability to repay a mortgage, including complaints about advice you received from a financial business, mortgage arrears and charges, not being able to change or move your mortgage or take a payment holiday, and repossession before possession takes place or after it has happened²⁴. Where a lender says the borrower owes the wrong amount, the ombudsman can order waiving or refunding interest, extra time to make missed payments, restructuring loans, or compensation for distress and inconvenience²⁵.

If you are acting under a power of attorney, you can bring a complaint to the ombudsman as the donor or granter if you have capacity, or as the attorney on behalf of the donor or granter²⁶.

What should I do if the borrower stops paying and I cannot afford the repayments?

If the borrower fails to make payments, the guarantor is legally liable to pay back the loan for them³. If you agree to be a guarantor for someone else's debt, you can be held liable for it if they fail to pay²⁷. You cannot be made to pay someone else's debts unless you are their guarantor²⁸.

Guarantor loan debts can be included in most debt solutions, like debt management plans and bankruptcy²⁹. But there is a catch where the borrower enters a formal arrangement. If the borrower goes bankrupt, takes a debt relief order or enters an individual voluntary arrangement, the borrower's liability for the debt is included in the formal arrangement, but the guarantor is still fully liable for the debt and expected to maintain the original repayments³⁰.

Breathing Space is a scheme that pauses debt enforcement, but the guarantor would not be protected unless they are also on the Breathing Space scheme¹⁸.

Where a guarantor can get free debt help

Free help exists and it does not cost anything to use. There are free advice services that can help⁹. A court duty adviser provides free legal help at the court⁸.

For guarantor loan debts specifically, the debts can be included in most debt solutions, like debt management plans and bankruptcy²⁹. If you own your home, there are debt solutions designed for homeowners¹⁴. If you are in Scotland, free money and debt advice is available⁹.

If you are dealing with the debts of someone who is vulnerable, there is guidance on how to handle that²⁸. If you are in Northern Ireland, there is separate guidance on mortgage arrears or payment difficulties³¹.

The Financial Ombudsman Service is free to use and can look at complaints about guarantor loans from borrowers and guarantors⁷. The FCA cannot pay compensation itself, so the ombudsman is the route to redress²⁰.