Finance Glossary
Guarantor
A person who agrees to repay a loan if the primary borrower fails to do so. Guarantors are typically required by lenders when the main applicant has a poor credit history or insufficient income. The guarantor must usually be a homeowner or have a strong credit profile themselves, as they take on legal liability for the debt.
Example
A borrower with bad credit asks their parent — a homeowner with a clean credit record — to act as guarantor on a £3,000 loan.
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