Car finance with a guarantor: how it works and when you need one

Do you need a guarantor for a car finance application? Find out what this means and what the risks and responsibilities are.



When you borrow money to buy a car, the lender needs to be sure you'll repay the money. In some cases, your credit history or what you're able to afford may make you look – in the lender's eyes – risky.

In this situation, you have choices. You can try working with a bad credit car finance broker like us. You could look at a different vehicle, ask for a shorter repayment term or work on improving your credit score.

Alternatively, you can put down a guarantor. This is somebody – usually a friend or family member – who promises to make the monthly payments if you fall behind or can't pay.

And when we say "promises", we're referring to a legal promise. Being a guarantor is a serious responsibility. That's why both you and the guarantor must be sure it's the right choice before signing the paperwork.

How does car finance with a guarantor work?

When getting car finance with a guarantor, there are three parties involved: the driver, the lender and the guarantor.

The lender lends the driver money. The driver is the sole registered keeper and driver of the car. They pay back the loan.

If the driver can't pay back the loan because of financial hardship, the guarantor has to step in and make the payment for them.

When do you need a guarantor?

You need a guarantor for car finance when a lender decides you're a high-risk borrower. This could be because:

• You have a poor credit score
• It looks like you'll struggle to afford repayments
• You don't have much of a financial history
  
  

A low credit score can be down to a range of factors. These include defaults (missed loan repayments), missed bill payments and County Court Judgments (CCJs).

It can also be a problem if you're a young driver or first-time borrower and don't have a credit history.

If you've just started a new job, you may lack long-term proof of reliable income. This can be a red flag for lenders who may ask you to name a guarantor.

You may also need a guarantor if you've changed your home address frequently or if you have a low income.

What are the benefits of car finance with a guarantor?

Putting down a guarantor for a car finance application increases your chances of approval. It can also help you secure lower interest rates if you have a poor or limited credit history.

This is primarily because a guarantor acts as a safety net for the lender. If you fall behind, the lender won't lose money.

In the case of young drivers without a credit history, a guarantor can help get you on the road.

If the guarantor has a strong credit score, the interest and APR on your loan can go down. That can mean a lower overall cost as well as lower monthly repayments.

Another benefit of car finance with a guarantor is that it helps you build your credit score. Once you've got the loan, you can demonstrate your reliability through on-time monthly payments.

And in some cases, getting car finance with a guarantor can help you access better cars and a wider range of options.

What are the risks of car finance with a guarantor?

Getting car finance with a guarantor can seem like a no-brainer. However, it's important to know the risks that go with this arrangement.

The guarantor's credit score is at risk in the event that they can't make the payment. And if there are delays in paying it back, they can be issued a CCJ.

Just as importantly, using a guarantor can in some cases lead to tensions between the driver and the guarantor. And remember that the guarantor is typically a friend or family member.

This isn't an argument against taking out car finance with a guarantor. It does mean, however, that it's not a decision you should take lightly.

Who can be a guarantor for car finance?

A guarantor for car finance is usually a friend or relative. They must be between 18 and 75. Many lenders stipulate a minimum age of 21.

The guarantor must have a strong credit score unmarked by recent defaults or CCJs, and they must be able to demonstrate a steady income. Owning a home isn't mandatory, but it can strengthen the application.

Finally, a guarantor must be a UK resident or citizen with a valid bank account.

Who can't be a guarantor for car finance?

Most of the time, you can't name someone as a guarantor if you have financial ties with them. That typically means no spouses, civil partners or business partners.

What are the alternatives to car finance with a guarantor?

There are three main alternatives to getting car finance with a guarantor:

1. Choosing a cheaper vehicle
2. Making a joint application
3. Working with a bad credit car finance broker, such as Zoomo
   
   

Let's take these one by one.

Choosing a cheaper vehicle means you're asking for a smaller loan. This can help you pass affordability checks.

A joint application involves applying with a spouse or partner who has a better credit history than you. The main drawback here is that if you default, both your credit scores are impacted.

Then there's working with a bad credit car finance broker like Zoomo. We'll put you in touch with a wide panel of lenders who consider what you can really afford – not just your financial history.

It's a quick, easy process. You can apply in minutes and know within the hour whether you're eligible. Once you've provided the necessary paperwork, you can receive the car within a week.

So, if you're looking for bad credit car finance in Newcastle, the North East or beyond, why not try applying online? It's quick and easy, and it won't affect your credit score at this stage.

Alternatively, browse our stock of used cars to see what's on offer.