A guarantor is someone who agrees to cover a specific financial commitment for you, if you’re unable to. You might be asked to provide a guarantor in order to take out a loan or to rent a property. Fortunately, almost everyone has the potential to be a guarantor - often including those who are retired.
Who might need a guarantor?
Not everyone needs a guarantor. But if a company or other service provider asks you to provide a guarantor, it will be because your circumstances suggest you’re at a higher risk of being unable to cover your costs at some point in the future.
Reasons you may be asked to provide a guarantor include:
- being unemployed
- having recently started work
- having a low income
- having no credit history
- having a low credit score
- being a student
- looking to rent for the first time
- having recently moved to the UK
If one of the above circumstances applies to you, it doesn’t mean you’ll definitely need a guarantor to take out a loan (for example). But it does mean you’ll be more likely to be asked.
What might you need a guarantor for?
There are relatively few cases where you might need a guarantor, but they’re common enough that they could affect anyone.
You might need a guarantor if you’re applying for:
- a loan
- a mortgage
- car finance
- a rental property
Who can be a guarantor?
Almost anyone can be a guarantor, but - as you might expect - it’s usually going to be someone who you trust, like a member of your family.
Suitable guarantors might include:
- a parent
- a grandparent
- a sibling
- a partner
- an extended family member
- a close friend
Being a guarantor is a serious commitment, so you’ll want to make sure both you and the other individual are happy with the arrangement.
In addition, it’s usually required that your guarantor:
- is between 21 and 75
- has a solid credit history
- has a good credit score
- has a stable income
- has some savings
A guarantor doesn’t need to be particularly wealthy or a financial professional.
Any company requiring a guarantor will have their own criteria (for example, requiring an income above a certain threshold) so you’ll need to speak with them first before searching for a suitable guarantor.
Can a guarantor be retired?
The primary concern of a lender or landlord is to make sure your guarantor can afford to cover your payments, should they need to. They shouldn’t be too concerned about whether the guarantor’s income comes from a working salary or a pension.
If your guarantor is retired and meets the criteria outlined in the above ‘Who can be a guarantor?’ section, the lender is likely to be happy with this.
It’s important to note that the maximum age requirement (usually 75) represents their age at the time your arrangement ends. For example, you could take out a five year loan when your guarantor is 70, as they’d be 75 by the time the loan ends. But they might not be accepted if they were 72 while you were trying to take out the same loan, as they’d be 77 by the time it ends.
However, the exact requirements will vary from lender to lender.
How should a retired guarantor prepare their finances?
It’s important that the person willing to be your guarantor is confident and in control of their finances.
This may involve:
- creating a budget to make sure they’re able to cover their own expenses as well as yours, should they be required to support you
- making sure they won’t hamper their long-term financial prospects if they need to support you (by taking more out of their pension, for example)
- factoring in their State Pension income if they’re due to receive it soon
If they receive income from more than one pension, they may want to consider consolidating their pensions into one plan so that it’s easier to manage. They might even save on fees by doing this.
PensionBee is a leading online pension provider, that allows you to combine your old pensions into a new plan online and for free.