Financing a car is a great way of spreading out the payments, making it more affordable while allowing you to get behind the wheel of something you might not otherwise be able to purchase outright.
There are a whole range of options available to you, but your things can become limited, particularly if you have a poor or lack of credit history. It’s why a guarantor is sometimes required, but what is one and do you need one to get car finance?
What is a car finance guarantor?
A guarantor is someone that agrees to cover the cost of your finance agreement or personal loan in the event that you fall behind on your repayments. This person, who is usually a close family member or friend, acts as a financial safety net. A guarantor typically has a strong credit history with a proven history of making repayments on time, and is usually a homeowner as well.
Why might you need a guarantor for your car finance?
Guarantors are usually needed if you don’t have a great credit history or have fallen behind on repayments in the past. They can quite often be used by younger people too, who might not have had time to build up a credit history of their own. A guarantor is only needed if you can’t get the finance or loan yourself.
Can I get car finance without a guarantor?
If you have limited or a poor credit history, it doesn’t necessarily mean you need a guarantor. Some people would just rather not put this potential finance burden on someone else, or you might not know anyone that could step in to act as a guarantor.
Many car finance companies will be able to work with you to work out your arrangements and find a manageable financial solution for you. They will likely perform soft credit checks (which won’t affect your score) to make sure that you’re able to afford the repayments.
What should I be aware of?
While you might not be a huge fan of having a guarantor, it can be a great way of making your car finance or loan more affordable to repay, and it’s often used by young people to help improve their credit score.
You should also think about ways of increasing your credit score, as this reduces the likelihood that you’ll need a guarantor in the future. This will likely bring down the interest rate too, meaning you won’t have to repay quite so much.
But you should also analyse your financial situation and think about whether you’ll be able to make your repayments, both now and also in the future. Remember to live within your means and not splash the cash as you might not be able to afford it further down the line.