If you’re thinking about taking out a vehicle loan, you may be considering getting a guarantor loan. Especially if you have less than perfect credit. But this type of loan isn’t the best solution for everyone - it’s important to carefully weigh up your options. We’ve therefore explored the pros and cons of guarantor vehicle finance below.

What is a Guarantor Car Loan?

A guarantor vehicle loan is where the borrower has a guarantor who will step in if they’re not able to keep up with the due repayments. Guarantor loans are often a good option for people with a low credit score, as they provide additional security for the lender. And as there is less risk for the lender, they are more likely to approve the loan. 

In theory, your guarantor won’t be impacted by the loan at all. If you’re able to keep to the agreement, your guarantor won’t need to make any payments on your behalf. The loan may not even be reported on their credit file. Though it’s important that your guarantor understands that the loan could be recorded on their credit report if payments are missed.

guarantor car loans

Can I Get a Car Loan With a Guarantor?

The simple answer is yes - there are various types of guarantor loan available when it comes to car finance. So if you’re a young driver, or haven’t taken out much credit in the past, you may find that guarantor loans are a great option for you. 

With most loans, the lender will look at your credit history to work out what type of borrower you are. But you may not have a lot of credit history, for whatever reason. A guarantor loan therefore reassures the lender - they may not be able to determine your creditworthiness, but they’ll have the additional security of your guarantor.  

Who Can Be My Guarantor With Car Finance?

Choosing someone to act as guarantor for your car loan can be tough. They need to be someone you can trust, and that you’re comfortable discussing your financial situation with. Often, this will be a close friend or family member. Your guarantor also has to be in a position to step in should you miss a payment. This typically means that they’ll need to be in full time employment. Some lenders may also ask that your guarantor be a homeowner.

Other considerations when it comes to guarantor car loans include things like your guarantor’s credit history - they will generally need to have a high credit score. Your guarantor should also be aged 18 or above, though some lenders will ask that they be aged 21 or 25 and over. 

Guarantor Car Loans for Bad Credit

As mentioned above, one of the reasons people choose to take out any type of guarantor loan is that they allow individuals with bad credit to borrow money. With guarantor car finance, not only is the loan secured against the vehicle, there’s also the added buffer of the guarantor to make the due instalments.

Unfortunately your guarantor can’t have a poor credit history. Usually, a guarantor will need a high credit score, to reassure the lender that they can be relied on to make any missed payments on the part of the borrower. 

buying a car

Pros of Guarantor Car Finance

When it comes to the pros of guarantor car loans, these tend to be relevant to any type of guarantor loan. So whether you’re taking out vehicle finance with a guarantor, or a personal loan, they have the same advantages.

The primary benefit of guarantor loans is that they make it easier for people with bad credit to access finance options. As your guarantor would make the payments should you be unable to pay, this lowers the risk of borrowing for the lender. You may also be offered lower interest rates than if you didn’t have a guarantor. And if the interest rates are lower, the monthly repayments should be too, making the car more affordable.

The other main advantage of guarantor loans is that they can help you build up your credit rating. One way of improving your credit score is to show that you’re able to manage money well. So if you take out a loan, and make all the repayments on time, you may find it easier to borrow moving forward. Do bear in mind though, that this is true of any loan, not just guarantor loans. 

Cons of Guarantor Car Finance

The main disadvantage of guarantor loans is that if the loan is defaulted on, it’s not just the applicant that is affected. The guarantor will also have a mark on their credit file, which often makes it harder for them to borrow again in the future. 

Another thing about guarantor loans that a lot of people find difficult is that you need to find a guarantor in the first place! This can often be easier said than done. It’s often hard to speak to friends and family about money, and even worse to ask them to become involved in your finances. 

Many lenders ask that your guarantor be a homeowner too. This not only makes it more challenging to find someone suitable to act as your guarantor, it can put your guarantor’s property at risk. If neither party was able to pay the loan, and the agreement was taken to court, any assets, including the home, could be repossessed by the lender.

Overall, as car finance is already a type of secured credit, some people feel that it’s not necessary to get a guarantor as well. They instead opt for no guarantor car financing options, like the loans offered by our network of lenders.