Can a Guarantor get their money back?

A guarantor loan involves the borrower signing a regulated Consumer Credit Agreement with the lender, with a guarantor agreeing to pay the debt if the borrower defaults.

Guarantor loans function differently from most other debts, and it is important for guarantors to understand this.

Even if the borrower is making reduced or token payments, the lender can still ask the guarantor to pay the full amount set out in the agreement. This means that informal payment arrangements made with the borrower do not always prevent the lender from contacting the guarantor for payment.

There are also some technical differences in how guarantor loans are treated compared to standard unsecured debts. This does not mean lenders can act unfairly or aggressively, but it does mean that common debt strategies, such as Token Payments, may not work in the same way for guarantors.

Because of this, guarantor loans often require a more cautious and individual approach. It is important for guarantors to understand that these arrangements carry additional risks and that outcomes can vary depending on the circumstances.

In FCA terms, you're not just “helping out” – you're equally responsible for the debt, and lenders must consider you as someone who could realistically be asked to pay back the entire amount plus interest. The regulator has often found that some firms didn’t properly assess whether guarantors could truly afford this, which has led to redress and enforcement.

If the guarantor is required to take over the loan payments but fails to make the agreed monthly payments, the loan may default. This could result in legal recovery measures, including potentially obtaining a County Court Judgment.

In reality, this isn’t an uncommon worst-case scenario. FCA data reveals that a significant proportion of guarantors end up making at least one payment. In a notable case, the regulator discovered that about 1 in 4 guarantors had to step in at some point during the loan. Therefore, when you agree to act as a guarantor, you should be prepared for the possibility that you may end up making payments.

Who Do Lenders Want as Guarantors – and Why?

Lenders offering borrowing through a Guarantor Loan are quite strategic in their choice of guarantor. They typically suggest a person who:

• Has a strong emotional connection to the borrower, such as a family member, spouse, relative, or close friend.
• Has assets, such as property.

The emotional attachment helps lower the chance of the borrower defaulting on payments. Meanwhile, the guarantor's assets offer the lender a way to recover the debt if the guarantor also defaults. Essentially, both strategies aim to accomplish one goal: securing the borrower's payment and reducing the lender's risk.

Citizens Advice has warned that guarantor loans can be just as harmful as payday loans, as friends and family are often emotionally involved without realising they can be pursued for repayment if the borrower defaults—regardless of relationship breakdown or significant changes in the borrower’s situation.

From the outside, being a guarantor might seem like “just backing someone up," but when you take a closer look, you'll see there's more to it.

• You are legally responsible for the full loan, not just a few missed payments.
• You can be chased for arrears, default interest and legal costs, including a County Court Judgment (CCJ) and enforcement if it reaches that stage.
• Your own credit file and ability to borrow in future can be damaged if things go wrong.

Unlike debts taken out in your own name, guarantor loans do not always allow the same flexibility with token payments or reduced offers. Even though lenders must still treat people fairly, they can legally ask the guarantor to continue paying the full monthly amount. This means that common debt strategies which work for other debts may be less effective with guarantor loans.