How To Get A Guarantor Loan In Canada

How To Get A Guarantor Loan In Canada

Written by Bryan Daly
Fact-checked by Caitlin Wood
Last Updated May 18, 2022

There are certain expenses in life that are far too great for our bank accounts to handle. Whether it’s buying a house, a car, or even paying for a home improvement project or a big family vacation, expenses like these can be pretty hefty. In these scenarios, taking out a mortgage, auto loan, or personal loan can help provide us with the funds needed to cover these expenses when our own finances aren’t adequate enough.

But what if you can’t get approved for a loan? What if your credit score is too low or your financial history is a little shaky? What will you do if your lender says no?

If you find yourself in this situation, you may want to consider a guarantor loan. This type of loan requires a guarantor to co-sign on the loan contract. Basically, the guarantor backs up the loan and promises to take over payments if you ever default.

What Is A Guarantor Loan? 

A guarantor loan is an installment loan that you can borrow and repay over time if you have someone to cosign your application, such as a trusted family member or friend. Typically, these loans are for $10,000 or less and they come with higher interest rates than other credit products because people who apply for them often have bad credit or spotty financial histories that prevent them from qualifying for regular personal loans.

How To Find A Guarantor To Co-Sign Your Loan

If you are unable to get a loan on your own, finding a guarantor to co-sign on your loan with you can be just enough to convince your lender to approve your loan application. But finding the perfect individual to act as a guarantor can be a bit of a challenge. You can’t ask just any person, as not everyone will necessarily be able or willing to accept this role.

Being a guarantor is a big responsibility. This person has to rely on you to follow through with your payments, or else they will be on the hook to take over payments for you. That’s a big gamble for them to take if you are unable to prove that you’re financially capable and responsible enough to repay the loan on your own.

Thinking about becoming a loan guarantor? Here are the requirements.

When picking a guarantor to co-sign on your loan, be sure to choose a trusted friend or family member. Not only is the guarantor taking a risk, but you are too if you don’t select the right person. Ideally, the guarantor you pick should be one who is already very responsible with their own finances and loans, has a track record of making timely payments, and a healthy credit score. At the end of the day, the trust goes both ways.

Always Think About The Future

Consider the implications of what will happen if you are unable to make one or more of your payments at some point down the line. Or think about what could happen if you’re no longer able to repay the entire loan. While you may be in a good financial position right now and are able to make your payments, consider what would happen if you lose your job, take a pay cut, suffer an injury, or medical condition that can make it impossible to work.

Anything can happen, as life can throw us a curveball when we least expect it. Consider the potential ramifications of not being able to follow through with your payments and how that could affect the guarantor and your relationship with this person.

Choose A Lender Who Specializes In Guarantor Loans

Not all lenders provide guarantor loans, so it’s in your best interests to find a specialized lender. Conventional lenders are not in the business of providing guarantor loans, nor do they typically provide bad credit loans to those with poor credit scores. For this reason, you’ll have to do some research to find a lender who deals specifically with subprime borrowers who need some sort of assistance getting a loan with the help of a guarantor.

Trying to compare lenders in Canada? Read this first.

What To Lookout For In A Lender?

That said, it’s important to be wary of the type of lender you work with. Some lenders in the subprime lending sphere may not have the borrowers’ best interests in mind, which can put both you and your guarantor in a precarious position if you’re not careful. It’s not uncommon for borrowers with a poor credit history to get scammed from lenders without even realizing it until it’s too late.

You can get a sense of whether or not a lender is shady right off the bat if they promise to approve your loan without even looking at your credentials or the credentials of your guarantor. Steer clear of lenders who make these outrageous promises.

The True Cost of Borrowing

Check out this infographic to learn about the true cost of borrowing. 

Reasons Why Someone Might Need a Guarantor Loan

There are plenty of reasons why you might have trouble getting approved for a traditional loan and may have to resort to a guarantor loan:

  • You have bad credit
  • You don’t want your credit report pulled
  • You can’t get approved for the loan amount you need with a conventional loan
  • You want to get a lower interest rate with the help of a guarantor

Anyone of the above-mentioned scenarios can put you in a position to take advantage of what a guarantor loan can offer you.

Wondering how lenders set their interest rates? Find out here.

No Credit Check Needed

The great thing about getting a guarantor to cosign your loan is that your credit score won’t be taken into consideration. This why this type of loan is such a great option for many Canadian consumers who are dealing with bad credit or other financial issues.

What To Look For In A Guarantor 

A guarantor is someone who agrees to take responsibility for your loan payments if you can’t afford them, which is why they must be trustworthy and financially prepared. Here are some of other important things to look for in a guarantor:

  • Age – Your guarantor must be past the legal age of majority in the province or territory the loan is coming from (at least 18 or 19 in Canada).  
  • Canadian Residency – To qualify with most lenders, a guarantor also has to live in Canada as a permanent resident or citizen for an acceptable period of time.
  • Reasonable Income – Next, your loan guarantor needs an average income that would sufficiently cover any payments they would have to assume if you default
  • Good Credit – Potential guarantors should have decent credit ratings too. In this case, a credit score of 650 – 900 and a solid payment history should do the trick. 
  • Steady Employment & Housing – If your lender sees that your guarantor is able to hold down a job and pay their living costs, your approval odds will increase.

How To Apply For A Guarantor Loan?

You (and your guarantor) can prepare for the guarantor loan approval process by:

  • Comparing Lenders – Don’t skip out on research. Make sure to choose a legitimate lender who offers affordable loans and has good customer reviews.   
  • Gathering Your Documents – Lenders may ask for several items to confirm your identity and income, like government photo ID, bank statements. or pay stubs.      
  • Completing Your Application – Once you’re ready, you and your guarantor can apply online or in person. This may require additional banking or personal data. 

What Do You Need To Qualify For A Guarantor Loan In Canada? 

Here are the general requirements to get a guarantor loan (for you and your guarantor):

  • Have a Canadian address and be past your provincial/territorial age of majority
  • Have a good credit score (650 – 900) and healthy payment history 
  • Have a stable source of income (employment, government benefits, etc.) 
  • Be discharged from any bankruptcies or consumer proposals

What Happens If I Can’t Find A Guarantor?

If you’re looking to apply for a guarantor loan, you need to find someone who is willing to be your guarantor. Whether it’s a lifelong friend of a close family member, it’s up to you to find someone. As mentioned before, you’ll need to do your due diligence to make sure you choose the right person, even if you have people in your life who are willing to step up and be your guarantor. But not everyone will necessarily be qualified to take on this role.

If you can’t find a guarantor, it may be in your best interest to seek out another form of financing. Depending on the reasons why you want a guarantor, here are some alternative options:

  • Bad credit lenders – These alternative lenders deal specifically with borrowers who have bad credit and place more weight on other factors when approving a borrower for a bad credit loan, such as income and employment status.  
  • Credit improvement products – You may want to give your credit a boost in order to increase your chances of getting approved for a conventional loan in the future. There are credit improvement products available out there that can help you improve your credit score for this purpose.
  • Debt relief services – If you’re drowning in debt and are having a tough time digging yourself out of a financial hole, there are debt relief services available that can help you effectively reduce your overall debt and free up more of your money that would otherwise have gone towards paying off your high-interest debt.
  • Credit counselling – If you’re unsure about what to do to improve your credit, you can work with credit counselling services that will educate you on what you need to do to improve your situation.

Guarantor Loan FAQs

Do I have to be employed to become eligible for a guarantor loan?

It depends on your lender but not always. While guarantor loans are for people who can’t qualify alone due to financial problems, including lack of employment, you might just need a steady income to qualify, even if it’s from government benefits.    

Can a guarantor withdraw their guarantee?

Most lenders will only let a guarantor out of their contract after the loan is fully paid, plus fees and interest. So, your guarantor probably won’t be able to take back their guarantee unless you make other acceptable payment arrangements with the lender.  

How long does it take to receive a guarantor loan?

As long as you and your guarantor fill out your sections of the application properly, the loan shouldn’t take too long to process. In fact, some guarantor loans are deposited within 24 hours, provided all the information checks out and both parties are reachable.  

What’s the difference between a cosigner and a guarantor?

A cosigner is often someone who you are borrowing money with. For example, if you and your spouse buy a house together, you will cosign the mortgage. However, a guarantor is essentially just vouching that your loan will be paid on time, and will make the payments if you cannot.

Who offers guarantor loans in Canada?

Although some lenders offer a variety of credit products and financial options, guarantor loans are mostly found through alternative companies, many of which are based online. These lenders specialize in clients with less-than-perfect credit and incomes.        

Bottom Line

If you’re in need of a loan but can’t get one on your own, guarantor loans may be a viable option. To help you find the right guarantor loan and work with a reputable lender, be sure to get in touch with Loans Canada today!


Rating of 5/5 based on 3 votes.

Bryan is a graduate of Dawson College and Concordia University. He has been writing for Loans Canada for five years, covering all things related to personal finance, and aims to pursue the craft of professional writing for many years to come. In his spare time, he maintains a passion for editing, writing screenplays, staying fit, and traveling the world in search of the coolest sights our planet has to offer. Bryan uses the BMO Cash Back Mastercard to earn cash back on everything from boring bill payments to exciting excursions. He is also a strong saver, holding both a TFSA and an RRSP account in order to prepare for his future while taking full advantage of tax benefits.

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