What is a guarantor in the context of obtaining a loan?

A guarantor, in the context of obtaining a loan, is a person who agrees to take on the responsibility of repaying the loan if the primary borrower defaults. This role is crucial, especially for borrowers who may not have an established credit history or sufficient income to qualify for a loan on their own. The guarantor provides additional assurance to the lender that the loan will be repaid, thus increasing the likelihood that the loan application will be approved.

The presence of a guarantor often allows borrowers to secure better loan terms or higher loan amounts, as lenders view the additional assurance as a reduced risk. This arrangement can be particularly helpful in situations where the borrower may struggle to meet the lending criteria independently.

In contrast, a co-applicant is someone who applies for the loan alongside the primary borrower and shares equally in the financial responsibility from the outset. A financial advisor offers guidance on financial matters but does not serve the role of a guarantor. A lender, on the other hand, is the institution or individual providing the loan itself, rather than offering a guarantee for repayment.