A guarantor loan is a type of unsecured loan where a third party will co-sign the agreement under the understanding that they agree to pay off the debt, should the borrower default on their agreed payments. The way this works then, is that you might take out a loan and then ask a parent or friend to sign as a guarantor. This way, if you fail to make a repayment, then your friend or guardian will pay it for you and that way, you will not miss any repayments.Guarantor loans are a relatively new addition to the loans market but the concept of a ‘guarantor’ is not. Guarantors have historically been used in a number of other financial agreements, for example in tenancy agreements. Here, a guarantor might agree to pay your rent if you should fail to make the payment on month.