When you’re a young adult, you’ll need to get a car. But you don’t exactly have a great credit score. Then you should try to go for guarantor car finance.
Getting a personal loan for a car can be difficult for someone with full-time work. It can be even more difficult if you have a bad credit score. This is why it can be a good idea to ask someone to your guarantor for a car.
What is guarantor car finance?
This type of car finance happens when someone else acts as a guarantor. They do this for someone who can’t get a car finance loan by themselves. The guarantors are responsible for making sure that the loan gets paid back if you can’t afford the repayments.
In most cases, the guarantor is a close friend or relative. In normal cases, the guarantor will have the load paid to them. You will get the loan paid to you after this. Then it will be your responsibility to make sure that the loan gets repaid.
Related: Car Ownership: Don’t Let Your Car Run Over Your Finances
How is guarantor car finance different?
The important difference between this and most car loans is that it involves a third person. Along with the guarantor, there is also you and the lender.
In a situation where you can’t pay back the loan, the guarantor will be responsible for repaying the loan. For example, if you miss a payment.
Getting a guarantor for your car loan is a good idea if you don’t have a good credit score. Also, doing this can help you rebuild your credit score.
How does it work?
Guarantor car finance is like a personal loan. The difference is that you’ve asked someone else who could step in if you can’t pay back the loan.
The guarantor car finance will also give an extra sense of security for the car loan. It gives them some peace of mind when they have bad credit.
Guarantor car finance for young car owners
In most cases, many young drivers haven’t had a chance to build up the ideal credit score or even start one. This will make it difficult for young drivers to get a car.
Having a guarantor will help you build your credit score. But also remember that it will also affect their credit score.
How do I find someone to be a guarantor?
This can be a difficult decision for anyone. This is a big decision for anyone because it can have a long-lasting impact on people’s lives. It’s also important to make sure it’s someone that you trust.
It’s best to ask someone that you feel comfortable talking to about finances. You should also make sure that they can afford to be your guarantor without difficulty.
For practicality, it’s also good to ask someone with a good credit score. They should also be between the ages of 18 and 75. It might be better to ask someone older than 21 years and who owns a house in some cases.
You need to make sure that they understand the financial implications if the loan doesn’t get repaid. They should understand that it could have a negative effect on their credit score.
Is there a credit check for guarantors?
To make sure that your guarantor is stable, the lender will run a credit check on them. The lender needs to know what kind of borrower they will be, especially if you won’t be able to repay the loan.
The guarantor will need to make sure their information is correct and up to date. This will give you a good chance of being able to get your car financed.
Will your guarantor need to own a home?
It’s not a must that your guarantor needs to be a homeowner. This will also depend on the lender.
Some lenders will consider those who rent. It will also be a good idea if they have lived at the address for many years and have a good credit score.
Can your guarantor have bad credit?
It’s quite unlikely that the lender will accept your guarantor if they have a bad credit score. In every case, the lender needs a good credit score to reassure them that the loan will be repaid if you can’t.