Car finance can help make vehicle ownership more accessible, but not everyone has a long credit history or meets every lender’s requirements.
A guarantor car loan is one option that may be available to people who are struggling to secure finance on their own. Here’s everything you need to know.
You can also find more advice on vehicle values, ownership costs, and motoring finances in our valuation guidance hub.
What Is a Guarantor on a Car Loan?
A guarantor car loan involves another person agreeing to take responsibility for the loan if the borrower is unable to keep up with repayments.
In most cases, the guarantor is a close family member or trusted friend who agrees to support the application.
The guarantor does not usually have ownership of the vehicle. Their role is simply to provide additional reassurance to the lender that the loan repayments will be made.
These loans are often considered by:
- Younger drivers with limited credit history
- First-time borrowers
- Individuals with a poor credit record
- Applicants who may struggle to access traditional finance options
Because a guarantor adds an extra layer of security, lenders may view the application as less risky.
What Is a Guarantor Responsible For?
A guarantor takes on significant legal responsibility.
If the borrower misses payments or defaults on the agreement, the guarantor may be required to cover:
- Outstanding repayments
- Interest charges
- Fees associated with the agreement
Before agreeing to become a guarantor, it’s important to understand the full commitment involved.
Questions worth considering include:
- How much is being borrowed?
- How long does the agreement last?
- How frequently are repayments due?
- Could the agreement affect your own financial commitments?
- What happens if the borrower cannot continue making payments?
It’s important for both parties to understand the terms before entering into any finance agreement.
How Do You Get a Guarantor Car Loan?
The Applicant
Requirements vary between lenders, but applicants will generally need:
- To be at least 18 years old
- A regular source of income
- A UK bank account
- Proof of identity and address
Some lenders may also consider credit history and other affordability checks.
The Guarantor
The guarantor is typically a close family member or trusted friend.
Most lenders will require the guarantor to:
- Be over 18 years old
- Have a UK bank account
- Have a stable financial history
- Pass credit and affordability checks
Lending criteria vary, so requirements may differ between providers.
How Much Can You Borrow?
There is no fixed amount.
The size of the loan will depend on several factors, including:
- Your income
- Your financial circumstances
- Your credit profile
- The guarantor’s financial position
- The lender’s criteria
Each lender assesses applications differently, so available borrowing amounts can vary significantly.
What Happens If the Guarantor Cannot Repay?
If the borrower defaults and the guarantor is also unable to meet the repayments, the lender may take further action to recover the outstanding debt.
This could include:
- Formal debt recovery procedures
- Legal action where appropriate
- Recovery of assets where secured lending arrangements exist
The exact outcome depends on the terms of the finance agreement and the lender’s policies.
Because of the potential financial implications, both the borrower and guarantor should carefully review all documentation before signing.
When it comes to buying a car and thinking about loans, it might also be worthwhile considering optional extras when buying a new car.
Can a Guarantor Car Loan Save You Money?
Potentially.
Because a guarantor reduces the lender’s risk, some applicants may be offered more competitive finance terms than they would receive on an unsecured basis.
However, rates, fees, and overall costs vary between lenders, so it’s important to compare the total cost of borrowing rather than focusing solely on monthly repayments.
As with any finance agreement, affordability should always be the priority.
Related Articles
The Bottom Line
A guarantor car loan can provide an alternative route into vehicle finance for borrowers who may struggle to secure finance independently.
However, both the borrower and guarantor should understand the responsibilities involved before entering into an agreement.
Carefully reviewing the terms, assessing affordability, and understanding the risks can help ensure the arrangement works for everyone involved.
If you’re planning to change vehicles, understanding the value of your current car can help you budget more effectively.