What is a Guarantor for a Car Loan & is it a Good Idea?
What is a Guarantor for a Car Loan & is it a Good Idea?
Posted on February 2, 2024
Guarantor car loans, or cosigner loans, can help if you are rebuilding credit or don’t have quite enough income to qualify for the car loan on your own. They are useful in accessing standard car finance without any extra complications.
We asked our auto loans team to explain guarantor car loans, what they are, how they work, and what benefits they bring.
What are Guarantor Car Loans?
Guarantor car loans are the same as cosigner loans. They are car loans where you’re the main borrower, as usual, but have someone come in with you to guarantee the loan.
That other person doesn’t own the car and they aren’t responsible for paying the loan. They only come into play if you default during the loan. Then they are responsible for making payments.
It’s a situation that requires trust and someone who trusts you enough to make payments and not put them in a position where they have to take over.
How Do Guarantor Car Loans Work?
For the most part, guarantor car loans work in the same way as a standard loan.
You apply for the loan using your own credit score and paperwork. You save for the down payment, prepare your trade-in and do everything as normal.
The main difference is that you take your cosigner with you when you sign for the loan. They also sign saying they will take over loan payments if you default.
Their credit score and circumstances are assessed alongside your own and will be taken into account when deciding whether to give you the loan or not.
If you make all your monthly payments, the cosigner will have to do nothing.
If you miss a payment or default, the cosigner will be expected to pay the loan until either you begin paying again or until the loan has been settled.
What’s the Benefit of a Guarantor Car Loan?
The only person who benefits from a guarantor car loan is you, the main applicant.
If your credit score isn’t quite enough to borrow the amount you want or it would require a bad credit car loan, using a cosigner could avoid that.
As the cosigner’s credit score is added to yours, it could mean avoiding the higher interest of a bad credit car loan and instead qualifying for a standard loan.
It could also mean avoiding a loan refusal for a range of reasons. As the cosigner’s situation is assessed alongside yours, combined, you may qualify for a loan together where you wouldn’t alone.
Where to Finance a Guarantor Car Loan
Guarantor car loans are a common way to access cheaper credit or to qualify for a loan when otherwise you might not.
As long as you can find someone who trusts you enough to cosign, they are a viable way of accessing cheap car finance. If that sounds like something you would benefit from, discuss your needs with our team.
If you're ready for a car loan, we'd love to help with that! simply fill in the form below to get started.