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Sometimes in order to secure a loan or competitive lending product, the person borrowing the money may need to get a guarantor.  A good example of this is where a young person wants a competitive mortgage deal, but they don’t have enough track record and enough accounts or employment history to get a good mortgage by them selves.  The way for such a person to get a good mortgage deal is to use their parents or another person as a guarantor, which has a good payment history and owns another property.  This offers the person borrowing the money a good deal, and gives the lender enough security.

Another example of where a guarantor is useful is when the person borrowing the money or getting the guarantor loan is when the borrower has a very bad payment record and no security to offer a lender in the form of a car or a property.

When arranging business finance is it common for a bank or lender to require personal guarantees from directors or other people willing to sign their homes or other assets as security.

If you are looking to buy a car, its now common that even with a succession of defaulted loans and other credit agreements, car finance is still possible as the car it self can be used as the asset to secure the loan on.  The lender gives careful consideration on the age and type of car they are willing to lend against, usually a car under 5 years old, where the depreciation is very predictable.  No credit check car finance does exist, but there are many reasons why the lender would run a credit check.  For example, the lender has to protect them selves from fraud so the much verify the information given by the person wanting the car finance against credit files and other public records like court records and voters roll.