Guarantor personal loans

Improve your chances of approval by applying with a guarantor.

By   |   Updated 16th July 2021

Comparing guarantor personal loans for $20,000.00 over 36 months

NAB Variable Rate Personal Loan

On NAB's website

NAB Variable Rate Personal Loan

Interest rate

From 6.99% (personalised)

Comparison rate

From 7.91% (personalised)

Repayment period

3 years

Application fee

$150.00

Monthly repayment

$622.08

Total repayment

$22,394.88

Highlights

  • Get a variable headline rate of 12.69% p.a.* (for new loans only). The interest rate you get may be different depending on your circumstance.
  • 13.56% p.a. variable comparison rate.
  • With redraw facility.
  • 1-7 years flexible loan term.
  • Borrow from $5,000 up to $55,000.

*The variable headline rate is what the majority of personal loan customers will get or lower.

NAB Fixed Rate Personal Loan

On NAB's website

NAB Fixed Rate Personal Loan

Interest rate

From 6.99% (personalised)

Comparison rate

From 7.91% (personalised)

Repayment period

3 years

Application fee

$150.00

Monthly repayment

$622.08

Total repayment

$22,394.88

Highlights

  • Get a fixed headline rate of 12.69% p.a.* (for new loans only). The interest rate you get may be different depending on your circumstance.
  • 13.56% p.a. fixed comparison rate.
  • 1-7 years flexible loan term.
  • Borrow from $5,000 up to $55,000.
  • Flexible weekly, fortnightly or monthly repayments.


*The fixed headline rate is what the majority of personal loan customers will get or lower.

Overview

Guarantor personal loans can open the door to borrowing if you’re struggling to get approved for a loan by yourself. This type of financing requires you to have the support of a friend or family member who agrees to cover your payments if you’re unable to pay.

What is a guarantor personal loan?

A guarantor personal loan is a personal loan that has been guaranteed by someone else. The guarantor can be anyone, including your parents, siblings, or a trusted friend, who agrees to accept financial responsibility if you can’t pay back your loan.

Who should consider a guarantor personal loan?

Guarantor personal loans can be a solution for financially independent people who are not eligible for a personal loan, most likely because of a poor credit report or low income.

Who can be a guarantor?

Generally, anyone can be a guarantor as long as there is no financial link between you and the guarantor. For instance, your spouse may not be able to act as a guarantor if you have a joint bank account.

In most cases, the guarantor is someone you know very well, such as a close friend or family member. It is common for parents to act as guarantors for their children. Siblings may also act as guarantors as long as they meet the lender’s conditions regarding the minimum age, credit history, and income.

What are the risks for the guarantor?

When someone agrees to act as a guarantor, they become responsible for making the repayments if the borrower cannot pay.

Once you’ve agreed to be someone’s guarantor and signed the loan agreement, you will not be able to remove yourself until the loan you’re backing is paid off in full. As a guarantor, you may also be unable to access funding yourself until the loan you’re backing is paid in full, which can mean up to five years without the ability to get a loan yourself.

The guarantor’s assets may also be at risk if the borrower was granted a secured loan. This is not the case for unsecured guarantor loans, but the lender may still pursue the guarantor for any unpaid debt.

Ultimately, the guarantor’s credit history can be adversely affected by any late or missed payments if the borrower defaults and the guarantor is not able to pay.

Alternatives

  • Joint loan application. A joint personal loan is a type of loan in which two or more people are responsible for the debt. This solution is suitable if you want to share the debt responsibility with a spouse, partner, family member, or close friend. The main advantage of a joint loan is that you can borrow more money, and your application is more likely to be approved.
  • Secured loans. It’s possible to get a secured loan without a guarantor, but you will have to secure your loan with an asset (such as your home, car, or other valuable items).
  • Borrow from family or friends. If you need a small amount of money to cover an emergency or unexpected bill, borrowing from family or friends is less risky than applying for a guarantor personal loan. Just make sure you agree terms and stick to them.

Learn about guarantor personal loans

Find out how they work, pros and cons, and more.

  • Pros & cons

  • FAQs

  • Guides

An option for people with no credit history

Borrowers with no credit history, for example a university student, can use a guarantor loan to establish their own credit.

Have the option to borrow

Guarantor loans give you the option to borrow if you can’t get approved on your own.

Interest rates are probably going to be higher

Interest rates for guarantor loans are often higher because of the perceived risk and the lender's relying on risk-based pricing.

Paperwork for the guarantor

Potential guarantors need to demonstrate they can afford to cover your repayments if you fail to meet them, which involves having them do paperwork with little personal reward.

Potential to build your credit

Your credit score can improve if you pay on time every month.

Relationships can be affected

Relations between guarantor and borrower can be damaged if you fall behind on repayments.

Does having a guarantor mean you can get a lower interest rate?

No. Having a guarantor means that you are more likely to have a loan application approved. However, interest rates for guarantor loans are typically higher compared to those of secured or unsecured personal loans.

Does the guarantor need a good credit score?

More often than not, the guarantor needs a very good or excellent credit score alongside proof of income and bank statements.