Guarantor Loans in the UK: Are They Still Worth It in 2025?

Guarantor loans remain a visible, if controversial, corner of the UK credit market in 2025. They were originally designed to help borrowers with poor or limited credit histories access cash by having a friend or family member (the guarantor) agree to cover repayments if the borrower defaults. That core idea — access to credit in exchange for someone else taking responsibility — still functions, but the landscape around pricing, regulation and consumer protection has changed enough that whether a guarantor loan is “worth it” depends heavily on alternatives, household finances, and the exact terms on offer.

Interest rates and fees on guarantor loans often remain higher than mainstream personal loans, so the cheapest route for an eligible borrower is almost always a standard unsecured personal loan or a credit-building product if credit history is the issue. Lenders that specialise in guarantor products typically charge elevated APRs to compensate for higher perceived risk, meaning the convenience of easier acceptance can come with a real long-term cost. For people with urgent needs and no other route, a guarantor loan can still be a lifeline — but it is rarely the lowest-cost option for someone who could qualify for mainstream credit.

Regulatory scrutiny in recent years has tightened the rules that govern how guarantor loans are sold and enforced. The Financial Conduct Authority’s guidance requires clear default notices and places responsibility on firms to carry out appropriate affordability checks on both borrowers and guarantors. The FCA’s enforcement activity and public guidance aim to reduce cases where guarantors unexpectedly face calls for payment because the original lending decision was poorly assessed. That regulatory backdrop has improved safeguards, but it also means lenders must be transparent about risk and firms that cut corners have faced penalties. Prospective borrowers and their guarantors should therefore look for FCA-authorised lenders and clear documentation before signing.

Beyond price and regulation, the human cost is the central risk that defines whether a guarantor loan is worth it. Family and friends who act as guarantors expose their own credit records, savings and emotional relationships to real harm if repayments falter. Complaints to the Financial Ombudsman in previous years have often revolved around guarantors who felt they were misled or insufficiently warned about the size of their potential liability. For many, that relationship risk outweighs the financial convenience, and independent advice for guarantors before they sign remains crucial.

There are now more practical alternatives than a few years ago. Credit unions, cheaper small loans from reputable mainstream lenders, credit-builder cards, and targeted support from debt charities can all be viable substitutes depending on needs and timelines. In some cases, taking steps to improve a credit profile or exploring a small loan from a regulated credit union will save money and preserve relationships in the medium term. However, for borrowers who cannot access those routes quickly and have a guarantor who fully understands and accepts the risk, a guarantor loan can be a pragmatic — if imperfect — solution.

In short, guarantor loans in 2025 are not categorically “good” or “bad.” They are a tool whose value depends on alternatives available, the cost of the loan, the lender’s transparency, and the guarantor’s informed consent. If you consider a guarantor loan, prioritise FCA-authorised lenders, compare APRs and total cost, seek independent advice for anyone acting as guarantor, and exhaust lower-cost regulated options first. When used carefully and transparently, guarantor loans still serve a purpose — but they remain a solution with trade-offs you should only accept after understanding the financial and personal consequences