Guarantor Personal Loans

Get approved for your personal loan with the help of a guarantor by comparing your options with Savvy.

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Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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, updated on July 4th, 2024       

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Looking to apply for a personal loan with the help of a guarantor? It's always important to survey the market before committing to your personal loan. You can do that right here with Savvy. Find the best loan for your needs by comparing a variety of offers from around Australia in one place. Get started with a free quote today.

What is a guarantor personal loan?

A guarantor personal loan is a standard personal loan that uses a third party, known as a guarantor, to guarantee the payment of the loan. This arrangement can be useful for people who have difficulty securing a loan, such as those with a poor or limited credit history, and can help you maximise your borrowing power and secure lower interest rates.

Your guarantor must be someone in a stronger financial position who is willing to assure the payment of your loan. This means that if you default on your personal loan, they will take on repayments until it’s fully paid out. Typically your guarantor would be someone you have a close relationship with such as a family member or close friend. They will also have to meet certain criteria, such as:

  • Having a good credit history.
  • Earning a stable income that is enough to cover loan repayments should you default.
  • Being at least 18 years old.
  • Living in Australia as a citizen or permanent resident.

Your guarantor may also be asked to put up their assets, such as equity in their home or a vehicle, as part of this arrangement. However, full control of these will revert back to the guarantor at the conclusion of your loan.

It’s important to note that while your guarantor agrees to shoulder responsibility for your loan, that this only comes into effect if you fully default on your repayments. If you’re able to keep on top of things, as the vast majority of borrowers do, your guarantor won’t become involved in the loan’s payment at all.

What loan types can I use a guarantor for?

The types of loans you can apply for with a guarantor are the same as any other personal loan. There are two main types of personal loans to choose between: secured and unsecured. There are key differences between them, so it’s important to understand how they work before applying.

Unsecured personal loans

The most common type of personal loans, unsecured finance is available to anyone without the need for you or your guarantor to provide a valuable asset as collateral for the loan. Loan amounts are available from as little as $2,000 all the way up to $75,000, with your approved amount depending on what you can comfortably afford (although lenders may be willing to grant loans beyond your standard affordability with a guarantor).

Secured personal loans

Unlike unsecured loans, secured loans do require that either you or your guarantor put forward an asset as collateral for your loan. Because of the added security, the maximum borrowing power sits at $100,000 (with a minimum of $15,000) and interest is offered at a substantially lower rate than an equivalent loan without security. As such, these loans are useful for larger sums of money and for borrowers (and guarantors) who have eligible assets at their disposal and want to reduce the cost of their finance deal.

Is a guarantor personal loan the same as a joint loan?

No, a personal loan with a guarantor is not the same as a joint loan. A guarantor-backed personal loan is suitable when someone needs help qualifying for a loan but needs someone else to act as security. A joint loan, meanwhile, is a loan taken out with another borrower (co-borrower) who is all equally responsible. Here’s a breakdown of how the two arrangements differ:

Guarantor loan Personal loan
One person takes out a loan and the guarantor acts as security.
Two people take out the loan together.
The borrower is primarily responsible for repaying the loan.
All borrowers are equally responsible for the loan repayments.
Primarily affects the borrower's credit, but can damage the guarantor's credit if the loan defaults.
Affects the credit reports of all parties involved equally.
Often used to help those with poor or limited credit history.
Typically used when both parties need the loan.

The pros and cons of guarantor personal loans

PROS

Greater chance of approval

Having a guarantor can increase your chances of loan approval, especially for borrowers with minimal credit history.

Better loan terms

Lenders may offer lower interest rates and better terms due to the added security provided by your guarantor.

Opportunity to build credit

Successfully repaying a guarantor loan can help improve your credit score.

CONS

Relationship risk

Defaulting on your loan can strain your relationship with the guarantor, who becomes responsible for your loan payments.

Financial burden

Your guarantor must be prepared to take on the financial burden of repaying the loan if you default, which can be a significant risk.

Credit impact on guarantor

If you default and your guarantor has to step in, their credit score can be negatively impacted.

Types of personal loan

Unsecured personal loans

With an unsecured personal loan, you can potentially borrow as much as $75,000 without the need to attach any valuable assets, such as your car, as security. These loans are the most widely available and often the quickest, with same-day approval possible.

Secured personal loans

Secured personal loans, on the other hand, make use of collateral. This lowers your risk profile in the eyes of a lender, potentially lowering your interest rate and expanding your borrowing power beyond what you may be able to get through an unsecured loan.

Variable rate personal loans

Variable interest rates remain open to fluctuation during your term. This means you can benefit from decreasing rates and save on your loan if the market heads in that direction, although you’ll also pay more if rates start rising.

Fixed rate personal loans

Fixed interest rates are locked at the beginning of your loan and remain constant throughout your repayments. This acts as a valuable protection against interest rate increases, as your loan will be unaffected, but you’ll miss out on potential drops as well.

Debt consolidation loans

If you’re paying off multiple debts at the moment, particularly those with high interest (such as credit card debts), consolidating them into one payment can not only make them more convenient to manage but also potentially save you money overall.

Travel loans

Looking to take off on a holiday with your family but want to pay it off at your own speed? Travelling can be expensive, so you can distribute the cost of your next trip over a period you’re more comfortable with by taking out a personal loan to pay for it.

Wedding loans

There are so many costs that go into making your dream wedding a reality, from venue hire to catering to dresses and suits and so much more. By taking out a personal loan, you can start planning the big day you want, even if you can’t pay for it upfront.

Renovation loans

Home improvements are desirable for a range of homeowners to help keep their living space fresh and interesting, not to mention increase its value. You can get past the financial hit of renovations with a personal loan paid in instalments.

Self-employed loans

Personal loans aren’t limited to PAYG employees, though. If you’re running your own business, you can still be approved for financing by submitting tax returns and other alternative documents instead of payslips and utilise your funds however you wish.

Student & education loans

There’s a variety of expenses which come with being a student, ranging from the cost of your courses, textbooks and computer to your accommodation. Taking out a personal loan can make these costs more manageable by spacing them out.

Green loans

Some lenders offer green personal loans, which are designed to be used for energy-efficient appliances and products such as solar panel and air conditioning installation in your home. You can qualify for lower interest rates and fees with this loan.

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How to apply for a guarantor personal loan

Frequently asked questions about guarantor personal loans

Will a guarantor guarantee the success of my application?

No – even with a guarantor, lenders won’t guarantee approval on any personal loans that they offer. This is because they’re subject to responsible lending guidelines enshrined in Australian law which they must abide by, the most important of which dictates that they can’t green light a loan that they’re not sure you can repay.

For example, if your lender only felt you were capable of repaying a $15,000 loan but you asked for $30,000, they wouldn’t be able to approve you for that amount.

Can I take my guarantor off my personal loan?

Yes – if your guarantor decides not to be involved in your personal loan, you can cancel it prior to receiving your funds or repaying the entire amount if you haven’t spent any yet. You may also be able to refinance to another personal loan product which doesn’t include a guarantor with a different lender during your term and pay your existing loan out early. You may incur fees for doing so, however.

Does having a guarantor impact the growth of my credit score?

No – even if you have a guarantor on your loan, your credit score will appreciate at the same rate as it would if you were repaying the loan as the sole member of the agreement. Credit reporting agencies and lenders will look to your repayment history, which won’t reflect the presence of a guarantor if you don’t default and allow you to build your credit score as a result.

Does a personal loan impact a guarantor’s credit file?

It can – the personal loan will show up on your credit file even if you aren’t involved in the repayments, which could (in theory) make it more difficult for you to get approved for other finance in the future. Additionally, if your borrower defaults on the loan and you’re unable to repay it, a default would go on your credit file and could severely damage your score.

Will I be able to access 100% finance with a guarantor?

Yes – there’s no obligation for you to supply a deposit on any personal loans, regardless of whether you have a guarantor attached. As such, you can access 100% financing for whatever you need provided you can afford to make repayments.

Helpful personal loan guides

Still looking for the right personal loan?

Personal loans come in all shapes and sizes, so read more about the ways you can use them, as well as how they might work for you.