Guaranteed Loans – Good for Bad Credit Scores

Lots of people find themselves in need of extra cash at certain times in their lives. Trying to find a loan, however, when you have a poor credit score can sometimes feel impossible. Taking out a guaranteed loan might be a solution!

All loans, including guaranteed loans, exist to help people deal with their finances. Guaranteed loans can be particularly helpful for people who find it difficult to get approved for regular personal loans because they have a poor credit score. But what exactly is a guaranteed loan? How do you get one? And what advantages do they offer over other loans?

In this article, we’ll answer all those questions. The first thing to know, however, is that if a loan is ‘guaranteed’, this doesn’t mean you’re guaranteed to get it. The word ‘guaranteed’ refers to a ‘guarantor’. This is a person you will need to find who will promise to pay off the debt on your behalf if you can’t make the repayments.

Read on to learn all you need to know about guaranteed loans.

What is a guaranteed loan?

You may see other lenders, including other payday loan lenders, offering loans for people with bad credit scores with guaranteed approval. That’s not what a guaranteed loan is. You don’t get definite approval with a guaranteed loan. In fact, you should never take a loan with certain approval. A guaranteed loan is, in fact, one where the loan applicant has the support of a guarantor.

The guarantor guarantees payment of the loan by agreeing to be liable for the repayments if the primary applicant is unable to make them.

This gives the lender more certainty that the loan will be paid off. If the primary applicant for the loan becomes unable to repay it, the lender is allowed to ask the guarantor for the money because they have agreed to pay.

Because guaranteed loans are much safer for the lender, lenders can offer them to more people. People who might not be able to get another type of loan will be more likely to be able to get a guaranteed loan. That includes people with a poor credit score and people with no credit history. If you’ve got a poor credit score, you’ll be much more likely to get a loan if you can find a guarantor to back you up.

How do you apply for a guaranteed loan?

If you want to apply for a guaranteed loan, here’s what you need to do:

  • Find a guaranteed loan provider that will accept you

  • Make sure they’re a lender you can trust

  • Find a loan with rates, terms and limits that suit you

  • Finally, before making your application, you need to find a guarantor

If you’ve got a bad credit score, remember to look for a lender that accepts people with a bad credit score.

Pick the right lender

You should pick a lender that’s trustworthy and offers the right loan products.

Check the lender offers the type of loan you need, and at a minimum never pick a lender that:

  • Isn’t FCA registered – You can search the FCA register to check whether the lender is registered with the FCA

  • Isn’t easy to contact with a verifiable address

  • Doesn’t have a verified history of positive reviews

  • Doesn’t have a trustworthy website

Don’t take a no credit check loan or one with guaranteed approval

It’s also important to understand that you should never take a guaranteed approval loan or one that comes with no credit check. A responsible lender will always run a credit check on both the primary applicant and the guarantor. This is because they need to make sure that both you and the guarantor are able to pay back the loan. Responsible lenders will only approve a loan after carrying out an appropriate credit check.

Lenders that offer loans with no credit check or guaranteed approval might be illegal, and it’s worth checking their credentials against the FCA register.

Pick the right guarantor

The guarantor will accept responsibility for the loan if you’re unable to repay it. They have to be someone you can trust and someone who trusts you.

In fact, most guaranteed loan applicants will choose a close friend or family member to be their guarantor. As well as being trustworthy and responsible, the guarantor also needs to have a good credit rating. Often, the person applying for the loan will be accepted if they have a bad credit score. The guarantor, however, will need to have a good credit score.

Guarantors need to understand that they will become liable for the debt if the borrower can’t make the repayments. If they agree to this, they can declare that they will act as guarantor during the application process. Remember that whenever you apply for a loan approval, it is never 100% guaranteed. Applicants with a bad credit score will, however, have a higher chance of being accepted than they will for the same type of loan without a guarantor.

What are the benefits of a guaranteed loan?

So what sorts of benefits do guaranteed loans offer over other types of personal loan? Well, there are actually plenty of benefits associated with guaranteed loans. Here’s why guaranteed loans often make a good choice.

  1. Guaranteed loans have a higher approval rate for everyone
  2. One of the main reasons people in the UK apply for guaranteed loans is that they offer a higher than average acceptance rate. This is especially true when you compare guarantor loans to standard personal loans. Having a guarantor backing up a loan gives the lender more certainty that they’ll be repaid, and this makes it easier for them to lend money.

    If you think you might not have your application accepted for a regular loan, a guaranteed loan could be just right.

  3. Guaranteed loans are good for bad credit scores
  4. As we’ve discussed in this article, a big advantage of guarantor loans is that they’re ideal for people who have poor credit scores. Getting a loan when you have no credit history or a low credit score can be very difficult. Banks often have minimum credit score requirements and will immediately reject applications for non-guarantor loans if an applicant’s credit score isn’t high enough. With a guarantor, lenders will be more lenient about your credit score.

    It’s also worth noting that guaranteed loans can be used to repair a damaged credit score. If you take out a guaranteed loan and pay it back successfully, this will improve your credit score.

  5. Guaranteed loans are less stress
  6. Applying for a loan with the backing of a guarantor can reduce the stress. With a regular loan, there’s more chance of rejection. Having a guarantor, however, reduces the chances, giving you less to worry about. After the application process is complete, having a guarantor will also mean that you’ll be backed up in case you can’t afford to make repayments.

  7. Better amounts, rates and terms
  8. The borrowing limits, interest rates and repayment terms can be more attractive with a guaranteed loan. Having a guarantor makes things easier for the lender, so they can offer a better deal. This also applies to people with a bad credit score. They can be offered more money, a lower interest rate and better repayment terms if they get a guaranteed loan instead of one without a guarantor. Just the same as people with a good credit score.


Am I guaranteed to get approved for a loan with a guarantor?

No, not necessarily. There are still certain requirements you’ll have to meet, and each lender will set different requirements. Your guarantor needs to have a good enough credit score for you to get approval as well.

Do 100% guaranteed approval loans exist?

No, it’s important to note that you should never apply for a guaranteed approval loan. Lenders that offer these loans are irresponsible. You shouldn’t trust them in any way, and you should avoid them entirely. Read here about loan sharks and what to look out for.

What can I use guaranteed loans for?

Most people use guaranteed loans to help them cover an unexpected cost that has come up, such as an urgent medical bill or emergency car repairs. Guaranteed loans should only be used if you really need one and when there’s no cheaper option available to you. Other things you might need to take out a loan for could be to help you pay for an oven repair or for sudden bills you didn’t see coming.

Representative example

Total amount of credit: £700
Duration of the agreement: 6 months
Repayment total: £1,179.05
Interest is Fixed at rate of 185.39% per year | Representative 611.74% APR
Instalment 1
Instalments 2 — 5
Instalment 6