Am I Owed a Refund on a Guarantor Loan?

Guarantor loans were sold as a fix for people with thin or poor credit, with a friend or family member backing the debt. But the lender still had to check the loan was affordable for you, the borrower, not just rely on the guarantor as a safety net. If they did not, you may be owed a refund of the interest and fees you paid. Guarantors have rights too: if the loan should never have been given, the guarantee can be wiped out and any payments the guarantor made handed back.

Reviewed by Corey Musa, Founder·Last reviewed June 2026·LinkedIn

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Your rights

Under FCA CONC 5, the lender had to assess whether you, the borrower, could afford the repayments from your own income, with the guarantor as backup rather than the reason to lend. They also had to make sure the guarantor understood the risk they were taking on. If the borrower's loan was unaffordable from the start, the redress is a refund of all interest, fees and charges paid above the amount borrowed, plus 8% simple interest a year. Where a complaint is upheld and the guarantor has been making payments, the guarantee is removed and the guarantor gets their money back. Guarantor loan complaints have historically had high uphold rates at the Ombudsman, so it is well worth pursuing. If the lender refuses, or does not give a final response within 8 weeks, the Financial Ombudsman Service will look at it for free.

Step by step

1Decide which hat you are wearing: the borrower (reclaiming interest and fees) or the guarantor (getting released and refunded). Both can complain, sometimes about the same loan.
2Gather your paperwork: the loan agreement, statement of payments, and anything showing the lender's affordability checks. Send a free Data Subject Access Request if the lender will not hand it over.
3Write to the lender. As the borrower, argue the loan was unaffordable under CONC 5 and ask for interest and fees back plus 8% simple interest a year. As the guarantor, argue the checks were inadequate and ask to be released and refunded any payments you made.
4If you get a rejection, or no final response within 8 weeks, refer it to the Financial Ombudsman Service through their free online form.

What they'll say, and your comeback

“The whole point of a guarantor is to cover the risk, so affordability did not matter.”

Comeback, Wrong. CONC 5 still required you to check the loan was affordable for me as the borrower. The guarantor was meant to be a backstop, not a substitute for assessing whether I could repay.

“The guarantor signed knowing the risks, so they cannot complain.”

Comeback, A signature is not the test. The lender had to make sure the guarantor genuinely understood the commitment and that the underlying loan was affordable. If the loan was mis-sold, the guarantee falls with it.

“You are still making payments, so there is nothing to refund yet.”

Comeback, If the loan was unaffordable from the outset, every payment of interest and fees is reclaimable, and future interest should be removed too. The Ombudsman can direct that the agreement be put right from day one.

FAQ

Can both the borrower and the guarantor complain?

Yes. The borrower can reclaim interest and fees they paid, and the guarantor can ask to be released and refunded any payments they personally made. They are separate but related complaints about the same loan.

Will complaining hurt the guarantor's relationship with the lender?

Complaining is your legal right and the lender cannot penalise you for it. If the complaint is upheld, the guarantee is removed entirely, which protects the guarantor from any future demands on that loan.

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A self-serve tool, not a law firm. General information, not legal advice.