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Guarantor Car Loans: Everything You Need to Know

Guarantor Car Loans: Everything You Need to Know

The car loan landscape is much more varied and interesting than it once was. It, along with many other areas of finance, have caught up with the times and now offer more flexible products to suit a much wider set of circumstances. One such product is the guarantor car loan.


So, what is it and should you apply for one? Our car loan team responds.

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What is a Guarantor Car Loan?


A guarantor is also known as a cosigner and is someone willing to come in on the loan with you. They guarantee to take over the loan payments if you can no longer pay.


If you have ever had to provide a guarantor for an apartment rental or student accommodation, the principle is exactly the same.


Guarantors are useful in some situations where you have a low credit score or need to borrow more than your credit score would normally allow.


How Does a Guarantor Car Loan Work?


The application process for a guarantor car loan is much the same as a standard loan. Rather than just having a single name or couple’s name on the loan, you have a primary borrower and a guarantor.


You sign the loan stating you’ll pay it off in full and the guarantor signs to say they will take over if you don’t.


It’s a very straightforward arrangement but isn’t ideal for everyone.


Who Should I Use as a Guarantor?


Who you choose as a guarantor on a car loan is entirely up to you and depends who you have in your life you can rely on and who trusts you enough.


It could be a sibling, parent, guardian, other family member, close friend or someone else entirely. What matters is their willingness to guarantee a loan for you and their ability to qualify for that loan.


Not only do you have to qualify for the loan, the guarantor does too.


Some lenders require the guarantor to be a homeowner while others don’t. All guarantors will usually have to be over 21 and under 75 and have a good credit score.


Is a Guarantor Car Loan a Good Idea?


That’s another question that depends entirely on your circumstances. They can be a good idea if you have poor credit or wouldn’t otherwise be able to qualify for the amount you want to borrow.


They can also be useful if you don’t have a credit history, if you’re a student or have just left home.


They also have downsides. They can charge higher interest rates than standard Georgetown car loans.


They also involve risk to the relationship between you and your guarantor. If you miss a payment and they have to take over, your credit score takes a hit but so does that relationship. You have to be ready for that possibility.


There are other methods of raising enough for a car too. Saving more of a down payment, using a bad credit car loan, trading in alongside a down payment and likely other methods too. It pays to fully explore your options before settling on one particular loan.


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