What is guarantor car finance?
This is simply a guarantor loan used for a car, which means you apply for the loan with someone who agrees to pay the monthly payments if you cannot afford them. The guarantor is usually a family member or a close friend, and they must be a homeowner or a tenant with a good credit score.
Why should you choose a guarantor with your car finance?
By using a guarantor with your loan you can often get a better interest rate than you would have on your own. This is particularly important if you have a bad credit score, because you may not be able to get your car finance approved without a guarantor, and so it can be your only option when looking for your first or a new car.
Who can be your guarantor?
You can choose anyone you like, however there are certain requirements on guarantors that make it difficult to choose just anyone. Firstly they can’t be connected with you financially, such as your spouse, because often if you cannot make the repayments they will also struggle to do so.
Next the guarantor should be a homeowner or at least a tenant of a property, as this is usually a sign of financial stability. They must also have a good credit rating, as they are supposed to be the reliable backup for someone with a poor credit rating.
It is recommended that you choose carefully, as your friendship or family relationship if things go wrong with your loan can be put under serious strain.
How does a guarantor loan work?
A guarantor loan is like any other loan, you simply have an extra part of the application to enter your guarantor details. This is required so that if you cannot make your repayments they can be contacted to do so. Usually they are only contacted once all other measures have failed for you making the repayments yourself.
So in the event that you cannot pay, they are legally obliged to pay the monthly repayments on the loan.
What are the implications of not paying?
All non-repayments of loans can affect your credit score, and this applies to both you and your guarantor. If neither of you can pay then it may be taken to court, and you could be given a County court judgement (CCJ) which will seriously harm your chances of getting credit in the future.
Does the guarantor need to be a homeowner?
As mentioned above in most cases the guarantor should be a homeowner, but some lenders will accept them being a tenant too. This will differ from provider to provider.
What if you’ve been rejected elsewhere?
Whilst rejection from a loan application is marked negatively on your credit score, you may still be able to successfully apply for a guarantor loan, because the guarantor helps to boost your chances with their good credit history.
Can you use this car finance to purchase from any dealer?
Yes you can use a guarantor car finance loan to buy your car from any dealer, which makes it much more flexible than traditional dealer finance, and also gives you a better place to negotiate from.
How to lease a car with a guarantor?
This is really easy, you simply apply for your finance and then negotiate the leasing agreement alongside it. There are also several lenders that specialise in leasing finance.
How long does it take to get a guarantor loan?
It is usually fairly quick to get a guarantor loan for your car financing, with some providers offering same day payouts. The usual checks will be done on your credit rating, and sometimes if things aren’t quite right then getting these sorted might take a few days.