Are you thinking about getting car finance soon?
In the UK, 9 out of 10 cars are financed. However, poor credit scores can make it difficult to secure a good deal.
The first-time car buyer is particularly concerned about car finance.
|You apply directly with the lender and receive a loan quote if you qualify for a car loan. You can’t use the car in-car loan until you pay the complete amount.
|In-car finance, you borrow through a dealer. The dealer helps you expose yourself to multiple lenders as per the requirement. Car finance allows you to use the car until you pay the entire amount.
Who is a guarantor on car finance?
The guarantor is the third party who is financially responsible for repayment. You can make your dear friend or near relative as the guarantor. The presence of a guarantor allows the person to secure guaranteed car finance for bad credit. If you cannot get car financing, the lender checks the credit score of your guarantor. In addition, if you miss out on the repayments, the guarantor would be responsible for the repayments.
The loan won’t affect the guarantor if the borrower continues to pay the repayments hassle-free and timely. The guarantor’s credit report will reveal missed payments and default on loans.
An applicant can have a suitable finance deal to purchase a car without any issue if he has the backup of the guarantor. It is an excellent opportunity for those seeking instant decision car financing.
Who Needs a Guarantor on Car Finance?
Here are the reasons or circumstances that you might need a guarantor:
- Inexperienced drivers with a little credit history
- Someone with a poor credit rating
- Previously rejected because of poor credit history
Can You Get a Car Finance with A Guarantor?
There are multiple types of car loans available for car finance. So, if you are a good car driver and haven’t taken a car loan previously, you can secure an easy and instant decision on car finance.
As a first-time car finance seeker, you might not be backed by a credit history that a lender could consider before providing the loans. Thus, having a guarantor on the loan can help you. A guarantor has a good credit history and score, which reassures the lender of the repayments by undertaking the additional security of the guarantor.
Choosing a guarantor for your car finance is the most important task. A guarantor is always someone close that you can trust – Mother, Father, Brother, etc, who can take the guarantee of meeting the repayments if you default on the same.
If you cannot pay the repayments, then they must make the remaining ones if you can’t. Thus, once you qualify for car finance, you may explore the best car loan deals and choose the one that you are comfortable with.
Who Can Be a Guarantor on Car Finance?
Here are the eligibility criteria for someone to be a guarantor on guaranteed car finance for bad credit:
- Must be above 18 years of age
- Citizen of the UK
- Someone with a good credit score and rating
- No history of missing repayments on the loans
- It is usually someone close- someone whom you can trust and the person who can trust you as well
- Can take the guarantee of making the repayments if the borrower cannot do so on the car finance
- Someone who can help you secure the car finance lending his good credit score and report
What Do You Need to Know as A Guarantor on The Loan?
A guarantor on the instant decision car finance should meet the following criteria:
- He/she should have a good credit rating. The credit score requirement for car finance differs from lender to lender and the amount you wish to borrow.
- Should have an excellent history of making payments. It is always useful if one could provide substantial evidence of the same.
- He/she should be familiar with the borrower and should be someone close.
- Sometimes, a guarantor needs to be a homeowner as well to qualify for the guarantor loan.
- He/she will need to make the repayments if the borrower cannot do so, even if the relationship with the borrower turns sour.
- If the borrower fails to make the repayments on time, the credit score of the guarantor could be affected.
Here are the criteria for someone WHO CAN NOT BE A GUARANTOR ON THE CAR LOAN.
- Non-UK resident
- Your spouse or partner
- People not having a UK bank account
- People under 18 years of age
- People with poor or very bad credit
Thus, ensure the guarantor meets the above criteria before going for the guaranteed car finance for bad credit.
How Does a Guarantor Car Finance Work?
Once an individual borrower chooses the guarantor for the car loan, the creditor conducts a few credit checks. He undertakes the credit score and history of both the guarantor and the borrower before lending the car loan.
The procedure of granting car finance involves conducting affordable checks credit checks and helping you choose the right car finance from the best car loan deals. After approval, both the applicant/borrower and the guarantor sign the loan agreement.
The lender does so because granting or approving car finance on poor credit is risky and with no surety of repayments. By having a guarantor on the car loan, the lender gets security on loan and thus approves the car finance. It means that the guarantor will give the loan amount to the borrower to make the repayments, which guarantees more authority to the guarantor over the car finance and the loan proceedings.
Thus, after approval, the borrower will make repayments based on the loan terms agreed with the credit. The APR will be paid upfront, and then the outstanding payments will be done according to the repayment plan.
What Are the PROS And CONS Of Getting a Car Loan with a guarantor?
However, getting a car finance/ car loan with a guarantor on loan can be a great option, but it has its pros and cons.
- Easy for the person to get exposed to the best car finance deals
- Can drive the car along with paying the sum
- Change the car finance to a more suitable and low-interest payment module
- In-car finance, one can spread the total sum in a lump sum
- With a guarantor on loan, car finance reduces the trouble for the borrower
- With a guarantor on loan, the borrower can secure a car finance deal at a comparatively low-interest rate
- A guarantor on the car loan can help the borrower build a credit rating
- Make monthly repayments on behalf of the borrower if one cannot do so
- If the borrower defaults on the loan, it will affect the borrower and the guarantor as well.
- The credit score and credit history of the guarantor may be affected.
- Finding a guarantor is a tough deal in the first place. Even the closest one denies becoming a guarantor on the car finance.
- Many lenders ask for the homeowner as a guarantor and thus reject the car finance if one doesn’t have it.
- If both the guarantors and borrowers cannot pay the complete loan amount, further proceedings may be subject to court.
- Most car finance agreements have a mileage limit to which you can drive.
- Additional costs of repairs and maintenance. You won’t be able to make any modifications to the car in finance.
- The car value might depreciate over time; thus, you might pay more than it cost
- Taking long-term car finance can affect your budget and other obligations
Apart from this, yes, you can change your car or trade-in or part exchange the car on finance. It is whether you own a car on hire purchase or Personal Contract Purchase (PCP).
So, yes, it is easier to get car financing with a guarantor. If you are new to car financing and do not have any credible credit history, are driving for the first time, or cannot secure a car loan on bad credit, you can take an instant decision on car finance with a guarantor.