If you want to finance a car but your credit is not quite there, having a guarantor on your loan may help. In this article, we will explain what a guarantor is, how they work in car finance, and who can benefit from having one. We will also go over what to think about before signing a credit agreement, as well as what happens if you do not make your car loan payments on time.
If you are unable to make your loan instalments, a guarantor will do so on your behalf. This provides an additional degree of assurance for the lender, making them more likely to approve your loan. Essentially, the guarantor serves as a co-signer for your loan, vouching for your ability to make the repayments.
How does a guarantor work in car finance?
If you have bad credit or no credit history, a guarantor might help you get approval on a used car loan or new car loan. Guarantors can increase the lender's willingness to approve loans by providing more security. However, it is crucial to note that guarantor loans include their own set of risks and considerations.
Can anyone be as a guarantor for car finance?
While legally anyone can be a guarantor, some requirements must be completed. Generally, the guarantor must have solid credit and a history of timely payments. The eligible age of the guarantor can differ from lender to lender.
Can I get car financing with a guarantor?
Yes, you can. If you do not have a good credit profile, a guarantor can help you get a loan. It can help with getting an approval for a loan to buy a car owing to poor credit. However, the final decision of loan approval depends on the lender’s policy.
Why use a guarantor for car financing?
If you have a poor credit score, you may face challenges while getting a loan as the lender may see you as a risky borrower. A guarantee with a good credit profile can help to mitigate some of the risk that the lender sees. The assurance provided by a guarantor may increase the likelihood of loan approval.
Who may need a car loan guarantor?
Getting a guarantor is a good alternative for persons with weak credit who may struggle to obtain a car loan on their own. This includes young drivers who have not yet established a credit history.
What else should you consider before entering into a credit agreement?
Before signing into a credit agreement, make sure you understand the terms of the loan and can make the payments on time. You should also examine the risks associated with having a guarantor on the loan. Additionally, to maintain a good credit score, borrow just what you can afford and repay it on time.
What happens if I do not make my car finance payments on time?
If you fail to make your payments, your guarantor will be responsible for making the repayments. This can put a burden on your connection with the guarantor and harm their credit score if they fail to make the payments. Furthermore, defaulting on a loan might have a bad influence on your credit score, making it difficult to obtain credit in the future. Make sure that the guarantor is aware of the terms and risks when they enter the agreement as a co-signer for your loan to buy a car.
Get a vehicle that you can afford
While a guarantor can help you acquire a car loan with bad credit, remember that all car loans have an influence on your credit score. Buy an affordable new car or a used car to minimise your monthly expenses. Make sure the new car loan or used car loan is manageable and your income can help you to pay off your loan on time. Doing so will also help you to keep your credit score in good standing.
