What are Guarantor Loans and How Do They Work When it Comes To Car Finance?


We all hate it.

If you’re being rejected for something essential, like finance for a car, it can be truly disheartening.

Sadly, Car Finance is one of those areas where a poor Credit Score can scupper your chances of getting finance. If you need a vehicle for work or ferrying the kids about, a “No” can be really disruptive.

A Guarantor Loan is a way to side-step that problem and bypass rejection, turning a “No” into a “Yes”. It gives you a warm, fuzzy feeling inside, doesn’t it?

What Is It?

It’s a loan,.. With a difference.

With a regular loan, your lender – whether it’s a finance company, a bank or a car dealership – will take a look at your financial past to see how much of a risk they’re taking if they lend you money. To do this they look at your Credit Score.

If they don’t like what they see then there’s a chance they could say no.

With a Guarantor Loan, someone you know – with a good Credit Score and over the age of 21 – steps into the picture. That person, known as a “Guarantor”, promises to Guarantee any repayments on your loan or Car Finance. If you fail to make a payment, they legally promise to make those payments for you.

This removes part of the risk in lending to you, making it more likely for you to be accepted for a car loan or lease.

Sounds Perfect. Can My Dad be My Guarantor?

Sure. Just about anybody can be your Guarantor, so long as they meet the criteria. They have to be:

    • Over the age of 21.
    • Under the age of 80 at the time your repayments end.
    • Have a good credit score.

If the lender is confident that your chosen Guarantor can cover your repayments, there’s a good chance they’ll be accepted. You’ll have to get your Guarantor’s agreement too! You can’t sign someone up without their knowledge: they will need to sign the paperwork too.

Your Guarantor needs to understand their responsibilities, too. It will be a legal responsibility to cover your payments. If they don’t or can’t then there will be consequences, including a potential hit on their credit score.

Talking of Credit Score,…

Once you have a Guarantor Loan and you’ve shown that you can pay off the instalments reliably, your Credit Score should start to improve. Credit agencies are constantly re-calculating your score based on how you’re managing your current credit. If they see that you’ve borrowed for a large item like a car and that you seem able to pay it off, this will start to work in your favour.

Beware, however: the opposite is also true. If you miss a payment or default on the Guarantor Loan, your Credit Score will take another big hit and this may impact the score of your Guarantor, making it more difficult for you both to secure finance in the future.

Talking to an Expert.

Not every Car Finance provider offers Guarantor Loans but there are some who specialise in them. You’re best talking directly to one of these expert lenders as they can talk you through the ins and outs, explain the interest and fees, and make all the necessary arrangements.

We work with a number of Finance Companies who specialise in Guarantor Loans so applying through us is always a good bet. And if you have any questions, just ask one of our friendly team and we’ll be happy to help.

Stay safe on the road!

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