Car finance with a guarantor: Your complete guide
Considering car finance but struggling with bad credit or no credit history? Don't worry, you're not alone. Many people face hurdles when it comes to securing car finance because of poor credit scores or lack of credit history. However, there's a solution that could make acquiring car finance a possibility for you – a guarantor.
Here are the answers to all the most common questions people have asked us about guarantor car financing, so you can make an informed decision on whether having a guarantor is right for you.
What is a car finance guarantor?
A car finance guarantor is a person who agrees to take responsibility for the repayment of a car loan if the primary borrower is unable to make the payments. Essentially, the guarantor acts as a safety net for the lender, providing an additional layer of security and increasing the likelihood of loan approval, particularly for individuals with poor credit or no credit history. The guarantor's role is to guarantee the loan, ensuring that the lender will be repaid even if the borrower defaults on their payments.
Can I get car finance with a guarantor?
Yes, you can. The short answer is yes – although we don't currently offer them at Car Finance 247, guarantor car finance loans do exist. A guarantor loan allows you to secure car finance even if you have bad credit or no credit history. With a guarantor in place, lenders are more likely to approve your application as they have someone to fall back on if you default on payments. So if you have a friend or a family member with good or fair credit history who would be willing to be your guarantor, you can apply for a guarantor car loan.
Can a guarantor loan be declined?
While it's less common for a guarantor loan to be declined compared to traditional loans, it's still possible. Lenders may decline a guarantor loan if they believe the guarantor doesn't meet their criteria or if they have concerns about the guarantor’s ability to repay the loan.
What credit score does a guarantor need?
The credit score required for a guarantor varies depending on the lender. Generally, a guarantor with a good credit score is preferable, but some lenders may accept guarantors with fair credit scores.
Would a guarantor give me a lower interest rate if I have bad credit?
Having a guarantor with a good credit score could potentially result in a lower interest rate for your car finance. Lenders may offer more favourable terms if they consider the risk of lending to be lower with a guarantor in place.
Does being a guarantor show up on your credit report?
The act of becoming a guarantor itself doesn’t actually show up on your credit report or affect your score, however there are some ways it can affect your report. While it doesn't directly impact your credit score, it could affect your ability to borrow in the future if the person you are acting as a guarantor for cannot make the repayments. If this happens, their credit will be added to your credit report.
Can I get a loan with bad credit and a guarantor?
Yes, having a guarantor can increase your chances of being approved for a loan, even if you have bad credit. Lenders are more willing to lend to individuals with poor credit if they have a guarantor who can guarantee the repayments. You may also be able to get car finance with bad credit without needing a guarantor, depending on your circumstances.
Can my dad be my guarantor for a car?
Yes, a family member such as your dad or any parent can be your guarantor for a car finance agreement. However, they must meet the lender's criteria, including having good or fair creditworthiness and financial stability from regular income.
Does a guarantor need to be working to get finance?
While it's preferable for a guarantor to be employed, some lenders may accept guarantors who are not working, as long as they have a stable source of income, such as pensions, retirement savings or investments.
Does a guarantor have to be a homeowner?
No, a guarantor doesn't have to be a homeowner. While being a homeowner may strengthen their application, it's not a strict requirement for guarantor loans.
How much does a guarantor need to earn?
The income requirement for a guarantor varies depending on the lender and the amount of the loan. Generally, lenders prefer guarantors who have a steady income that is sufficient to cover the repayments if the borrower defaults.
What to do if no one can be your guarantor
If you're unable to find a suitable guarantor, you may need to explore alternative options such as improving your credit score or saving for a larger deposit to increase your chances of being approved for car finance.
Can a retired person be a guarantor?
Yes, a retired person can be a guarantor as long as they meet the lender's criteria for creditworthiness and financial stability. Retirement income, such as pensions or investments, may be considered when assessing their ability to guarantee the loan.
What are the disadvantages of a guarantor loan?
While guarantor loans can be beneficial for borrowers with bad credit or no credit history, there are some drawbacks to consider. These may include higher interest rates, the risk of damaging the guarantor's credit rating if payments are missed, and potential strain on the relationship between the borrower and the guarantor.
Who is eligible for a guarantor on a loan?
Most people choose a close friend or family member to be their guarantor. People who have a good credit history, stable income, and a willingness to guarantee the repayments of the borrower are all potentially eligible to act as a guarantor on a loan.
Who qualifies as a guarantor?
A guarantor is typically someone with a good credit history, stable income, and a close relationship with the borrower, such as a family member or friend.
Who cannot be a guarantor?
There are some people who would be unable to act as a guarantor in the eyes of most lenders. These include people with poor credit history, people with unstable or no income, or people who are financially dependent on the borrower.
Can a guarantor be blacklisted?
If a guarantor fails to meet their obligations and the borrower defaults on the loan, it could negatively impact the guarantor's credit rating. However, being a guarantor does not automatically blacklist someone from obtaining credit in the future.
Do guarantors need to give bank details?
Yes, guarantors may be required to provide their bank details as part of the loan application process. This allows lenders to verify their identity and assess their financial stability.
What checks are done on a guarantor?
Lenders typically conduct credit checks and affordability assessments on guarantors to ensure they are creditworthy and capable of guaranteeing the loan repayments if the borrower defaults. Credit checks for guarantors are usually soft checks, which do not affect your credit score and don’t show up on your credit report.