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Activating a guarantor requirement for your loan product
When a borrower defaults on a loan, the lender absorbs the loss. That is the blunt reality of unsecured lending. One of the most practical ways to reduce that exposure is to require a guarantor before disbursing a loan. A guarantor is a third party who agrees to take on repayment responsibility if the borrower fails to pay.
Lendsqr lets you configure this requirement directly on any loan product. You can choose whether to require one guarantor or more, depending on the risk level of the product. This guide explains what the guarantor requirement does, how it affects the loan approval flow, and how to set it up in your admin console.
What a guarantor requirement does in lending
A guarantor requirement means a borrower cannot receive a loan until at least one other person has reviewed and accepted responsibility for the debt. That person, the guarantor, typically completes a verification step to confirm their consent.
This matters for lenders for several reasons.
It raises the psychological barrier to default. A borrower who knows a friend or family member is on the hook for their debt is less likely to walk away from repayment. The social accountability works alongside the financial one.
It gives lenders an additional recovery path. If the borrower stops paying, the lender can pursue the guarantor. This is especially useful for loan products where borrowers have limited credit history or where income verification is difficult.
It signals borrower intent. A borrower willing to involve a guarantor is making a more serious commitment than one who is not. Lenders often find that borrowers with guarantors perform better on average than those without.
Not every loan product needs a guarantor. The decision depends on the risk profile of the product and the borrowers it targets.
First-time borrowers: Someone applying for their first loan has no repayment history with your platform. A guarantor adds a layer of accountability while you build a track record with that borrower. Once they repay successfully, future loans can proceed without one.
High-value loans: For loans above a certain threshold, the financial consequence of default becomes significant. Requiring a guarantor for larger amounts is a proportionate response to higher exposure.
Thin-file borrowers: Borrowers with limited or no formal credit history are harder to assess using traditional scoring. A guarantor supplements that gap, giving the lender an additional point of accountability.
Group or community lending: In some lending models, members of a group guarantee each other’s loans. Requiring a guarantor per member formalizes this arrangement within the loan product structure.
How guarantor validation affects the loan approval flow
Once you activate the guarantor requirement on a product, it becomes a mandatory step in the borrower’s application journey. The loan cannot proceed to approval or disbursement until the required number of guarantors have completed validation.
Here is how the flow typically works. A borrower submits a loan request and nominates their guarantor or guarantors. Each guarantor receives a notification and completes a verification step, which may include confirming their identity and accepting the guarantee terms. Once all required guarantors validate, the application moves forward in the review queue.
This adds time to the approval process, which is a trade-off lenders should plan for. If your product targets borrowers who need a fast turnaround, a single guarantor requirement keeps the delay manageable. If your product serves higher-risk segments where accountability matters more, requiring two guarantors may be worth the longer timeline.
It is also worth planning for the edge case where a guarantor declines or fails validation. If one guarantor declines, the borrower needs to nominate a replacement. The loan stays pending until the required number of validated guarantors is in place. If you require two guarantors and one declines, the borrower must find and submit a new one before the application can continue.
Your team should monitor applications sitting in the pending guarantor state, since delays here sometimes reflect a borrower who is struggling to find willing guarantors, which can itself be a useful signal about loan quality.
Step-by-Step: How to activate guarantor requirement
Follow the steps below to configure your loan product with a guarantor requirement in the Lendsqr Admin Console:
Go to “Loan Products” under the Product Management section.
Select an existing loan product or create a new one.
Ensure the loan product is saved before proceeding.
2: Enable the Guarantor Requirement
Open the loan product and navigate to the “Product Attributes / Settings” tab.
Scroll to find the “Guarantor Required” setting.
Click on the “Guarantor Required” setting to open a modal.
At the bottom of the modal, click “Edit”.
3: Activate the Settings
Check the “Guarantor Required” box.
Click “Save” to apply the setting.
You’ll be redirected to the product attributes view.
4: Set the Number of Guarantors
Scroll to the “Guarantors Required” setting
Enter the number of guarantors required (e.g., 1 or 2).
Click “Submit” again to finalize the setting.
✅ How to Confirm It’s Active
Once you’ve saved the changes:
Go back to the Product Attributes/ Settings tab.
You’ll see a status field showing whether the Guarantor Requirement is active (displayed as true) or inactive (false).
To learn more about managing guarantor details on individual borrower profiles, read the guide on how to manage guarantor details. For practical guidance on identifying risky guarantors before approving a loan, visit the Lendsqr blog.
