Guarantor Loans Gone Wrong: When the Borrower or Guarantor May Have Grounds to Complain
Guarantor loans were sold, for many years, as a straightforward solution for people with poor or limited credit histories. The pitch was simple: find someone who trusts you enough to co-sign, and you can access credit that would otherwise be out of reach.
What wasn't always explained so simply was the full extent of the commitment being made — by either party. Borrowers were sometimes approved without proper affordability checks. Guarantors were often signed up without a genuine understanding of what they were agreeing to. And the lenders behind many of these products have since faced significant regulatory scrutiny, enforcement action, and in some cases, administration.
If you were involved in a guarantor loan — as a borrower or as the person who guaranteed someone else's debt — there's a real possibility that the product wasn't sold to you fairly. This article explains how these loans work, where things commonly went wrong, and what grounds may exist for a complaint or refund.
How Guarantor Loans Are Supposed to Work
A guarantor loan is a type of personal loan where a third party — the guarantor — agrees to repay the debt if the main borrower fails to do so. The guarantor is typically a family member or close friend with a stronger credit profile than the borrower.
For the lender, it reduces their risk. For the borrower, it provides access to credit they might not otherwise qualify for. For the guarantor, it's an act of trust — and potentially a significant financial liability.
Interest rates on guarantor loans are typically high, often ranging from 30% to 70% APR or above. This reflects the perceived risk of the borrower, but it also means the total cost of borrowing can be considerably more than a conventional personal loan.
What Went Wrong With Many Guarantor Loans
The guarantor loan market grew substantially through the 2010s, with lenders like Amigo Loans, George Banco, and TFS Loans becoming significant players. The FCA's increased scrutiny of high-cost credit — and a wave of consumer complaints — eventually led to major problems for the sector.
Amigo Loans, at one point the dominant player in the market, went through a lengthy scheme of arrangement process after being overwhelmed by affordability complaints. TFS Loans entered administration. George Banco faced similar pressures.
The core issue across the sector was the same: lenders were not properly checking whether borrowers or guarantors could genuinely afford the loan.
Borrower Complaints: When the Affordability Check Failed
For borrowers, the most common grounds for complaint are closely linked to those seen in other high-cost credit products — payday loans, catalogue credit, and similar.
A lender approving a guarantor loan is required to assess whether the borrower can afford the repayments from their own income, without relying solely on the guarantor as a safety net. The existence of a guarantor does not remove the obligation to assess the borrower's affordability independently.
If you were approved for a guarantor loan when you were:
Already in financial difficulty with other debts
Relying on benefits as your primary income without that being properly considered
Repaying multiple high-cost credit products simultaneously
Unable to meet your basic living costs without the loan
...then the lender may not have met their regulatory obligation. A successful complaint can result in a refund of all the interest you paid, removal of negative entries from your credit file, and a write-off or reduction of any outstanding balance.
This sits within the same framework as a mis sold payday loan claim — the principles of irresponsible lending apply across all high-cost credit types, not just payday products specifically. Our article on car finance affordability checks and when lenders should have said no explains how these obligations work across different types of credit, and the same logic applies here.
Guarantor Complaints: A Frequently Overlooked Route
Here's the part many people don't realise: the guarantor themselves may have grounds to complain — completely separately from the borrower.
For a guarantor to be validly signed up to a loan agreement, the lender should have:
Properly explained the nature and extent of the commitment. Being a guarantor isn't like being a reference. You are legally liable for the full loan if the borrower doesn't pay. That liability needs to have been communicated clearly — not buried in small print while the conversation focused on helping out a family member.
Carried out a proper affordability check on the guarantor. The lender should have assessed whether the guarantor could genuinely afford to repay the loan in a worst-case scenario. If the guarantor was asked to step in, would doing so cause them significant financial hardship? If the lender didn't properly investigate this — relying only on a credit score or a brief income check — that may be a failure of their obligations.
Given the guarantor independent opportunity to consider the agreement. Guarantors should have been given enough time and information to make a genuinely informed decision, without pressure from the borrower or from the lender's sales process. Where the application process was hurried, or where the guarantor felt socially or emotionally pressured into agreeing, that is relevant to how the product was sold.
Not relied on the guarantor simply as a collections tool. Some lenders treated the guarantor primarily as a means of ensuring repayment rather than a party whose interests also needed to be protected. That approach sits uncomfortably with the FCA's requirement to treat customers fairly.
If you acted as a guarantor for someone else's loan and found yourself called upon to make payments — or if you're concerned that you agreed to something you didn't fully understand — it's worth having your situation looked at properly.
What Happens When the Borrower Defaults
When a borrower misses payments on a guarantor loan, the lender is entitled to approach the guarantor for repayment. In practice, some lenders did this very quickly — sometimes after only a handful of missed payments — without first making reasonable efforts to work with the borrower.
The FCA's rules on fair treatment of customers, and its guidance on forbearance for customers in financial difficulty, apply here. A lender that bypasses genuine efforts to help the borrower and goes straight to the guarantor — particularly where the guarantor is themselves in financial difficulty — may not have acted properly.
If you were a guarantor who was called upon to repay a loan, and the circumstances in which that happened felt unfair or abrupt, that's worth raising in a formal complaint alongside any affordability concerns.
The Lender Is in Administration — Can You Still Claim?
This is one of the most common questions around guarantor loans right now, and the answer is: possibly yes, depending on the lender.
When a lender enters administration, the administration process typically includes a mechanism for handling outstanding customer complaints and redress claims. This was the case with Amigo Loans' scheme of arrangement, which — after a lengthy and contested process — established a fund for eligible claimants.
If the lender you borrowed from is no longer trading under the same name, that doesn't automatically mean your claim is lost. The Financial Services Compensation Scheme (FSCS) may also be relevant in some circumstances. Getting proper advice on your specific situation is the right approach rather than assuming nothing can be done.
The time limits question is also important here. In general, you have six years from the date of the loan, or three years from when you first became aware you might have grounds to complain — whichever is later. With some lenders in administration setting their own deadlines for claims submission, acting promptly matters. You can claim today to find out where you stand before any relevant deadline passes.
Repeat Loans: A Strong Signal of Irresponsible Lending
Just as with payday loans, a pattern of repeat guarantor lending is often strong evidence that affordability wasn't being properly assessed.
If a borrower repaid one guarantor loan and immediately took out another — or if the same lender offered a top-up on an existing loan when the borrower was already struggling — that pattern suggests the lender was prioritising lending volume over responsible practice.
Each individual loan needs to be assessed on its own merits, but a history of repeat borrowing from the same lender is exactly the kind of pattern that the Financial Ombudsman Service looks at closely when upholding complaints. Our article on PCP mis-selling and common sales tactics that breach UK standards covers how patterns of repeat engagement with high-cost credit products are assessed — the principles translate directly to the guarantor loan context.
How to Build Your Complaint
Whether you're the borrower or the guarantor, a well-constructed complaint gives you the best chance of a satisfactory outcome.
Gather your documents. Pull together the original loan agreement, any statements you have, and any correspondence with the lender. If you don't have these, you're entitled to request them. A Subject Access Request under UK data protection law will produce everything the lender holds about you.
Set out your financial position at the time of the loan. The complaint needs to demonstrate what your income and outgoings looked like when the loan was approved, and why a proper affordability check should have flagged the problem. Bank statements from the relevant period, payslips, or benefit statements are all useful here.
Document the impact. How did the loan affect you financially? Did you fall into arrears? Did you cut back on essentials? Did you take out further credit to manage the repayments? All of this paints a picture of the harm caused.
Submit a formal complaint to the lender. Address it to the complaints department, set out your grounds clearly, and state what you're seeking — typically a full refund of interest paid, removal of adverse credit markers, and write-off or reduction of any outstanding balance.
Escalate to the Financial Ombudsman Service if needed. If the lender rejects your complaint or doesn't respond within eight weeks, you can refer the matter to the FOS, which will investigate independently and make a binding decision.
If this feels like a lot to manage alongside everything else, that's exactly why working with a specialist helps. Our team handles all of this on a No Win, No Fee basis — you don't pay anything unless the claim is successful.
Other Financial Claims Worth Considering
If you've been affected by a guarantor loan that wasn't properly sold, it's worth thinking about whether other financial products in your history also need looking at.
Car finance is a common area. If you took out a PCP or HP agreement and the terms weren't properly explained — or if a discretionary commission arrangement inflated the rate you were charged — there may be grounds for no win no fee car finance claims running alongside your guarantor loan complaint.
If financial difficulty led you to payday or high-interest lending more broadly, a mis sold payday loan claim covers the same irresponsible lending principles and can be pursued at the same time.
If you've also been the victim of financial fraud — including fraud recovery situations where money was taken from you under false pretences — Claim First handles that too, all on the same No Win, No Fee terms.
And if you're renting a property that hasn't been kept in proper repair, a housing disrepair no win no fee claim can be pursued entirely independently of any financial complaint — with the potential for both repairs to be enforced and compensation to be paid.
FAQs
Can both the borrower and the guarantor complain about the same loan?
Yes. The borrower and the guarantor are separate parties, each with their own relationship to the lender. Both can raise independent complaints, and a successful complaint by one does not prevent the other from also pursuing redress.
What if I was pressured by a family member to act as guarantor?
Pressure from the borrower is relevant context, but it doesn't automatically give you grounds against the lender. What matters for a lender complaint is whether the lender itself failed to properly explain the commitment, carried out an inadequate affordability check on you, or otherwise failed in its obligations towards you as a customer. That assessment is independent of the relationship between you and the borrower.
Does making a complaint affect my relationship with the person I guaranteed?
That's a personal matter and not something we can predict. What we can say is that a successful complaint typically results in compensation or debt reduction — and in some cases, the removal of a debt that was creating financial hardship. Many people find that resolving the financial problem is better for relationships in the long run than leaving a damaging debt unaddressed.
What if I've already paid off the loan in full — can I still claim?
Yes. Having repaid a loan does not remove your right to complain about how it was sold. If anything, a fully settled loan makes the refund calculation cleaner — you're seeking a return of interest and charges paid, plus statutory interest at 8% per year on those amounts.
What if my credit file has negative markers from the guarantor loan?
A successful irresponsible lending complaint can result in adverse credit markers being removed. This is one of the most practically valuable outcomes for many people — particularly if those markers have been affecting your ability to access credit or rent property since.
How long does a complaint typically take?
Lenders have eight weeks to respond to formal complaints. If the matter goes to the Financial Ombudsman Service, it can take longer — sometimes several months. We manage this process on your behalf and keep you updated throughout so you don't have to chase it yourself.
Does it cost anything to find out if I have a claim?
No. There are no upfront costs and no fees of any kind unless your claim succeeds. Getting your situation assessed costs you nothing.
Think Your Guarantor Loan Wasn't Sold Fairly? Let's Find Out.
Whether you were the borrower or the guarantor, if the loan wasn't sold to you properly — if affordability wasn't genuinely checked, if the commitment wasn't clearly explained, or if you were approved when you clearly couldn't afford the repayments — you may have grounds for a refund.
Claim First is a UK-based, FCA-authorised claims management team. We handle irresponsible lending complaints — including guarantor loans — on a strict No Win, No Fee basis. You pay nothing upfront, and nothing at all if your claim is unsuccessful.
Start your claim today — it takes just a few minutes online, and we'll handle everything from there.
