If you need to apply for a loan or a credit card, or rent a home while you’re at uni, the people or company you go to will want to make sure you can pay them what you’ve agreed to.
If you’re borrowing money, that company is a bank; for credit card companies, it’s a credit provider; and for renting a home, it’ll be a landlord or letting company that asks you to provide a guarantor.
What they’re asking for is someone that can guarantee to make a payment or repayment for you, if for some reason, you can’t.
The reason they have to ask for a guarantor is not because you look shifty or irresponsible. They simply need to see certain things in place, which act as trust signals, in order to loan you money or rent a property to you.
Unfortunately, these things can be hard to produce for students. These trust signals are:
While you’re studying (and especially if you’re a full-time student) you might not receive a regular salary or income. Companies like to see this because it proves you’ve got money coming in to meet any agreed payments. Even if you get a full or part-time job while studying, providing recent payslips may not cut it either, as they don’t show long term proof you can make repayments that companies need.
Companies do a credit check of your credit history to see how well you’ve been able to make payments before; it lets them see if you have any black marks against your name from the past. Missing loan payments or bills could stand in your way, as will brushes with the law. However, most new students won’t have a credit history at all, because they aren’t old enough to take credit.
If a company can’t see evidence of these two things, they’ll need some other proof the debt can be paid.
That’s where the guarantor comes in. A guarantor is a person who can co-sign any agreement you have with a bank or landlord, effectively saying that they will pay up if you start to miss payments or damage a property.
It’s a good deal for the lender or landlord for two reasons. First, because they have more of a guarantee that they’ll get paid if you default. And second, because most people will be a bit more responsible if they think they are going to lumber someone else with a bill should things go pear-shaped.
Pretty much anyone who can get credit themselves in the UK could be your guarantor. They’ll have to have their credit history checked and will need to provide confirmation of their home address.
They may also be asked for other evidence that they can make a payment for you, such as providing payslips or showing recent bank records.
Strictly speaking, your guarantor will also need to::
But different organisations could ask for different things as evidence.
Although many new students use their parents or another relative as a guarantor, this is obviously not possible in all cases.
The good news is that anyone who meets the criteria above can guarantee your transaction. As they are effectively risking their own money, it should be someone who knows you well. It’s unlikely that a complete stranger would guarantee your loan or rental, however charming you are, but they should understand the risk – and you have a responsibility to explain it to them.
We should offer a word of warning about having a guarantor sign your contract with your landlord. Many students share accommodation and split the rent two, three, four or more ways. It makes sense as it’s usually cheaper to rent a house than several flats or bedsits.
Just make sure that your guarantor is guaranteeing to pay your debt only – not those of the whole household. It’s not unusual for students to come and go from a rented house, and the makeup of the group changes from time to time. Sometimes you’ll end up with a friend of a friend of a coursemate living with you. You might not know much about them or how to contact them if they suddenly leave or damage something, and it might be down to your guarantor to cough up the cash. We’re pretty sure that would not be a pleasant conversation to have.
If you can’t find a guarantor, your options could be quite limited as you won’t have your own credit history to protect you. This can be frustrating if you’re an honest, careful and trustworthy person. Students from overseas can find it difficult, too, as their families won’t qualify as they are not UK citizens. The only options left would be as follows.
First, if you have any savings or can borrow money off a friend or relative, your landlord might accept a whole year’s rent in advance instead of a deposit and guarantor. For sure, not many people can afford this, but it is worth exploring if it’s a possibility. You could pay back the person who lent you the money every month, so they shouldn’t be out of pocket.
Another option is using a professional guarantor service. They are essentially insurance providers that underwrite your rent for a fee. Most will accept monthly payments. When you sign a rental contract, they can co-sign your contract as your guarantor and will be the organisation that is contacted if you default or disappear. Make sure you do your homework and check the T&Cs before signing up, but if it’s the only option, it could be worth it. Just make sure you stay squeaky clean during your tenancy, especially if you want to use the company again.
Hopefully, you’ll never need to use the guarantor to pay off your debts. It’s simply a safety net for the lender or landlord. Budget well, don’t have wild house parties and make sure you always pay up on time, and you and your guarantor should be just fine.