A guarantor loan allows people with no or a very low credit score to borrow if they have a guarantor who agrees to cover any unpaid monthly repayments.
We have found that 35 times more people were approaching charities for advice regarding their guarantor debt in 2018 compared to 2012. This is likely to be as a result of their total debt being comprised more heavily of guarantor loan debt, thus suggesting that this type of debt is becoming more of an issue.
The StepChange Debt Charity reported to helping up to 357,525 UK citizens with their debt as of 2018. The number of clients they have had and the number of those requiring help with guarantor loans is shown below.
| Year | Clients debt advised | Clients with guarantor debts |
|---|---|---|
| 2012 | 196,411 | 635 |
| 2013 | 284,947 | 2,919 |
| 2014 | 340,528 | 3,944 |
| 2015 | 307,043 | 8,123 |
| 2016 | 339,687 | 10,663 |
| 2017 | 357,386 | 16,485 |
| 2018 | 357,525 | 22,281 |
The number of clients they have had and the number of those requiring help with guarantor loans have generally increased over the six-year period. While the increase in clients overall does not increase year on year, the number of clients with guarantor debt increased each year, at a rate of 106% on average each year for the 6 years. Therefore, people are appearing to become more dissatisfied with their guarantor loans as more are requiring help with their debt.
The average income, the average guarantor loan debt, and the average total debt of the clients shown above is in the graph displayed below.
| Year | Average income | Average guarantor loan debt | Average total debt |
|---|---|---|---|
| 2012 | £1,536 | £3,109 | £16,277 |
| 2013 | £1,553 | £3,595 | £16,297 |
| 2014 | £1,559 | £3,775 | £15,058 |
| 2015 | £1,533 | £3,269 | £13,041 |
| 2016 | £1,528 | £4,395 | £14,676 |
| 2017 | £1,590 | £4,312 | £15,020 |
| 2018 | £1,589 | £4,206 | £15,173 |
The client’s average income remains around £1,555 for each year while the client’s average total debt fluctuates. Meanwhile, there is a positive increase for the average guarantor loan debt, being 41% higher in 2016 compared to only 3 years prior. Therefore, while the overall debt that the clients have is changing, the guarantor loan debt is on the rise.
In fact, the percentage of the client’s total debt that is made up of guarantor debt has increased from 19% in 2012 to 28% in 2018.
A guarantor is necessary to cover any missed payments on the repayment of a loan. They will have to be over 21 and have a good credit rating. In addition, some require that the guarantor is a homeowner.
| Relation | Percentage |
|---|---|
| Mother | 25% |
| Father | 16% |
| Friend | 22% |
| Colleague | 2% |
| Other | 35% |
Asking parents to act as a guarantor was a popular choice – 41% of people chose this option in 2018, with a quarter of all people asking their mother. After mother, the next most popular guarantor was a friend. Only 2% decided to ask a colleague and the remaining 35% preferred to ask another person.
Matt Mckenna
UK Head of Communications
T: +44 20 8191 8806
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