Many motorists presume that a guarantor loan means more complications and a complex process, thus they avoid this type of agreement when it comes to buying a car. However, a guarantor loan is a fantastic way to better your chances of being approved for a car loan if you have bad credit or no credit score to begin with.
How Does a Guarantor Loan Work?
“Generally speaking, the guarantor for your loan can be anybody from the age of 18 to around 75 years old but they have to have a regular or monthly income”, Kevin Spars of Eden Commercials. Your guarantor doesn’t necessarily have to be a homeowner either, but this would increase the chances of your loan being approved and it might be approved much quicker than expected.
With a guarantor loan, you are fully responsible for making the repayments, but if you default or for some reason you cannot make a repayment one month, your guarantor has accepted to make the repayment on your behalf. With that said, you should consider making sure that your guarantor is someone who trusts that you can make the repayments and is someone who you have a good relationship with – most people usually ask a family member or a close friend that they can trust to help them out.
Normally, your guarantor will have to go through the same process and checks as yourself; providing bank statements, bank details and proof of ID so that the finance lender knows whether this person is a suitable choice based on their previous and current financial responsibilities and situation. By choosing to take a guarantor loan, you will increase your chances of being approved for finance in the future.
One of the best things about a guarantor loan is that because you will be making regular monthly repayments, a guarantor loan can also help you better your own credit score, this means that you’ll have a much better chance of being approved for finance in the future.
How does this help me get a loan?
In most cases, the lender will consider a guarantor loan a much safer option – if ever you were to fall behind on payments, they know that there is a reliable back-up they can rely on to cover the payments you cannot make. Due to this, you could be offered a lower annual percentage rate than you would be offered elsewhere and once you and your guarantor have been accepted and all the boxes have been ticked off, most guarantor loans are finalised within 48 hours.