Guarantor car finance: Is it the right option?

Guarantor car finance is a way for people with a poor credit history to get car finance.

It relies on a trusted person – a guarantor – to make sure you meet your repayments. If you can’t pay, the debt is then theirs.

Confused.com doesn’t compare guarantor car finance. This guide is for information only. But we do compare car finance for people with bad credit, which may be another option for you.

Mother and daughter looking at their finances together 

What is guarantor car finance?

Guarantor car finance is a type of car finance loan where a third-party is involved to guarantee the loan repayments are made. 

If you can't make the repayments, your guarantor must pay for the loan. 

Guarantors are often close friends or family members - typically someone you can trust.  

Looking for finance on a new car?

How does guarantor car finance work?

Guarantor car finance works in much the same way as a regular car finance agreement.

You get the car, but you don't own it immediately. You make monthly repayments until the end of the agreement and then it's officially yours.

The only difference is the presence of a third-party - the guarantor.

The guarantor can be considered a safety net. If you miss a payment, the debt becomes their responsibility.

Can I get guarantor car finance?

There are 2 main types of people who might choose guarantor car finance:

  • Young drivers with little credit history: This could help them afford a car and build their credit rating
  • Someone with a poor credit rating: Having a guarantor allows them to get a more expensive car or a more favourable agreement

Why could guarantor car finance be a good option?

Guarantor car finance means someone with a good credit rating guarantees that the payments will be made. This means you could get a better finance deal than if you tried doing it on your own.

If you have a poor credit rating, you might have trouble getting a finance deal. Having a guarantor might give you a few more options to consider.

Guarantor car finance for young drivers

If you're a young driver, you may not have a good credit rating yet. Guarantor car finance is something to consider when searching for car finance options for young drivers

Having a guarantor means the lender takes the third-party's credit history into account when making their decision as an extra level of assurance. Your guarantor vouches for you and help you make the repayments should you need it. 

But you need to make sure you ask someone you trust to be your guarantor.

Making your repayments on time helps to improve your credit history. This means the next time you apply for finance, you may not need a guarantor again.  

Who can be a guarantor?

The specifics vary between lenders, but in general, they look for:

  • Someone with a good credit rating
  • Someone with a good history of making regular repayments - for example, a mortgage
  • Usually a close friend or family member – someone you trust and who trusts you
  • Someone over 21 – some lenders may be okay if they're over 18
  • Some lenders may need them to be a homeowner 

What are the risks of being a guarantor?

Many people think that guarantor car finance is too risky. You're choosing to have a financial association with someone who has bad credit. 

If things go bad, it affects both of you. If neither of you can afford the repayments, both your credit ratings could suffer.

No matter what happens, you’re still responsible for the debt. Even if you no longer have a relationship with the other person, you must still make the payments.

With this in mind, be sure you can afford the repayments if the other person can’t before agreeing to anything.

Make sure you trust the person you’re acting as guarantor for and check that you have a good credit history.

Can I be a guarantor with bad credit?

No, it's unlikely that you'd be accepted as a guarantor with bad credit. 

Every lender has their own requirements. But the main factor to consider is whether you can afford the payments if the borrower can't. A low credit score doesn't provide evidence of this. 

The more you improve your credit score, the more likely you'd be accepted. 

Is there an alternative to guarantor car finance?

If you have a poor credit rating, you might not be able to get good finance deals on your own. But there are alternative options out there.

Some lenders have agreements tailored to people with poor credit history. The rates may not be as good as those with a guarantor, but they could be better than a standard finance agreement.

If this sounds like it could work for you, you can compare quotes for bad credit car finance.

You could also try improving your credit rating before looking for a finance deal.