If you’re looking to apply for a loan to get the dream car you always wanted –but don’t have a good credit score or no credit history– you might want to consider getting a car loan with a guarantor.
But, how does it work, who can be your guarantor, and what are the eligibility requirements?
Read on to find out.
What Is a Guarantor Car Loan?
A guarantor car loan is a type of personal loan where a third-party guarantor agrees to guarantee the repayments for the borrower.
The borrower is still responsible for the loan repayments, but if they miss any or fail to keep up with them, the responsibility falls on the guarantor.
How Does Guarantor Car Loan Work?
The process of obtaining a car loan guarantor is pretty simple.
If you’ve found a good car finance deal with a guarantor, you’ll need to fill out an application form and wait for a specialist to process your car request. The lender will look at your credit score and financial situation to decide whether to approve your application.
When applying for car loans with a guarantor, keep in mind that your guarantor will have to pass the lender’s checks as well.
How the funds will get to you depends on the lender. Some lenders transfer the money to the guarantor first.
What Happens If I Can’t Pay My Monthly Repayments?
If you can’t pay your monthly payments, your car finance guarantor will be responsible for paying.
Defaulting on payments will hurt both your and the guarantor’s credit score.
Who Can Be My Guarantor?
A guarantor can be pretty much anyone that meets the car finance guarantor requirements set by the lender. They can be a family member, a friend, or anyone you trust.
The car finance guarantor must:
- Have sufficient income to prove they can afford the loan.
- Have a good credit score and debt management history.
- Be between 18 and 75 years old.
- Not have a financial link with the borrower.
What Do I Need To Apply For a Car Loan With a Guarantor?
To apply for a car loan with a guarantor, you’ll need to provide:
- Name and address.
- Phone number.
- Driving licence.
- Employment history.
- Residential status.
However, whether you’re eligible to apply for a car loan with a guarantor in the UK, will depend on factors like:
- Your age: You have to be between 18- 75 years old.
- Residency: You need to be a UK resident for at least a year.A resident in the UK for at least a year.
- Income: Have a minimum income of £1,000 income.
Check out this list of Guarantor Loans with High Acceptance Rate.
What Does a Guarantor Need To Provide For a Car Loan?
Before approving car finance with a guarantor, your lender will ask the guarantor to provide:
- Name and address (ID).
- Contact number.
- Employment history.
- Credit score.
- Loan and debt management history.
- Documents and details on any other guarantor loan.
- Bank details.
- Car or real estate possession.
This will help the lender determine whether the guarantor can pay back the loan (in case you default on payments).
Who Is a Guarantor Car Loan For?
A guarantor for car finance is a good idea for people who:
- Have a poor credit history: Lenders are less likely to accept applicants with a bad credit score. Even when they do, the loan usually comes with a high-interest rate. If you have a less-than-ideal credit score, then you might want to consider asking a guarantor to help with your car finance or get a loan with lenders that accept bad credit.
- Have a short-term loan history rating: If you have no or very little credit history, you might struggle to get approved for a regular loan since most lenders won’t have enough information to determine whether you’re a responsible borrower. In this case, having a car guarantor to finance your loan will not only help you obtain a car, but it can help you build up your credit score as well.
Things To Consider If You Are The Guarantor For a Car Loan
Being a guarantor is a risky business.
If you agree to be a guarantor for a car finance loan, you will be responsible for covering any missed payments and even the loan in its entirety if the borrower can’t.
This could put a strain on your relationship with the borrower.
What’s more, defaulting on payments can damage your credit score, even if the loan isn’t technically yours, which will, in turn, hurt your chances of getting a loan or good interest rates in the future.
You may be interested in: How to get defaults removed?
Bottom Line
Getting a guarantor for a car loan is a great option for people who have little to no credit history or a bad credit score.
Having a guarantor on the loan can help increase your chances of getting a loan and might even boost your credit score– provided that you don’t miss any repayments.
Frequently Asked Questions And Their Answers
Can I finance a car with a guarantor?
Car guarantor loans are popular among people who are less likely to get approved for a regular loan because of a bad credit score.
Can my mum get a car on finance for me?
You cannot apply for finance on someone else’s behalf. The person signing the agreement usually has to be the registered keeper and the main driver of the vehicle.
How much can I borrow if I have a guarantor?
The amount for a car loan with a guarantor depends on a variety of factors, including your and your guarantor’s financial circumstances, employment status, and credit history.
My name is Marija, and I'm a financial writer at DontDisappointMe. Although finance might not be everyone's cup of tea, my 10+ years of working in one of the biggest banks in my country, and my interest in extensive research on everything finance/investment-related, have made me somewhat of an expert in the field (if I do say so myself). No longer having the passion to work in a corporate setting, I decided that I couldn't let all of this knowledge go to waste so I started writing. And, here I am! Today I try to share my knowledge with my audience in the hopes of making this topic as simple and interesting as possible. In my leisure time, I like spending time with my family and travelling to new locations.