Guarantor Car Finance: Is it the right option?
Guarantor Car Loan
In an ideal world, you’ll be able to get whatever car finance option you want. However, that’s often not the case – especially if you’re a young driver! With a non-existent credit rating and financial history, it can be tough to get accepted for a car finance agreement. That’s where the Guarantor Car Finance comes in.
What is guarantor car finance?
This is a personal loan – but you’ve got someone to back you up. Someone who makes the repayments for you if you’re not financially able to do so (for whatever reason). Usually a parent or guardian for most young drivers.
Can I get car finance if I have a guarantor?
If you’re a particularly young driver, a guarantor car finance deal might be all you can get! However, this isn’t necessarily a bad thing, as you can end up with a better credit score at the end of it – if you can prove you’re a reliable person and don’t need to fall back on the guarantor.
How does a guarantor loan work?
A guarantor car loan works pretty much the same as a personal loan. You’ll have to contact a bank and fill out your information. The main difference is that you’ll then nominate a guarantor, who will guarantee the loan repayments if you can’t.
In most cases, the money is released to the guarantor – and then they can send it to you. However, it’s ultimately your responsibility to make the loan repayments directly to the lender: unless you’re unable to.
Is guarantor car finance only for young drivers?
No – anyone can take it out. However, it’s a pretty standard option for the young driver, as we tend to have a sparse credit history, making it challenging to get accepted for other kinds of finance.
Who can be a guarantor for me?
Being made a guarantor isn’t something to be taken lightly. You want this to be someone you’re extremely close with and trust a lot. Usually, this is a family member or a close friend.
The guarantor needs to be over 18 and have a solid credit history. However, lenders can decide their criteria, and it’s not uncommon for banks to require guarantors to be over 25. Sometimes, lenders can even request that the guarantor is a homeowner.
Your guarantor will require credit checks, which can show up on their credit history. Unfortunately, your guarantor will be required to have a good credit score, as the bank needs to know they’re financially reliable.
If the loan is not paid back, the guarantor can face the consequences. Resulting in their credit score tanking or can even put their property at risk of repossession.