What is Guarantor Car Finance and How Does it Work?
30th May 2025
Using a guarantor to secure car finance is a common practice for buyers who lack credit history, often due to their young age, or have a low credit score. Both situations can lead to loan requests being denied by lenders and dealerships.
Having someone officially and legally assume responsibility for the loan repayments can increase the chances of a successful application and may result in lower APR rates. This article will explore how to obtain a loan with a guarantor, as well as the potential risks involved in choosing this financing method.
- What is a guarantor for car finance, and how does it work?
- What are the eligibility criteria for becoming a guarantor for car loans?
- Advantages and risks of getting a car loan with a guarantor
- Steps to apply for car finance with a guarantor in the UK
- Can you get a car loan using a guarantor with bad credit?
- Frequently Asked Questions
What is a guarantor for car finance, and how does it work?
A guarantor is someone you know who legally agrees to cover your finance payments if you miss them. This person is usually a family member or friend with a good credit history and a high credit score. By co-signing the loan, the guarantor provides assurance to the lender that repayments will be made on time.
Guarantor car finance is helpful for those without a credit history, often due to their young age, or for those with a low credit score.
Overall, the process of obtaining this type of finance is similar to getting a personal loan. You can choose the type of car finance that best suits your financial situation and check which type of agreement your guarantor would be most comfortable with. The PCP and HP are the most common options, and your guarantor will co-sign the contract with you.
What are the eligibility criteria for becoming a guarantor for car loans?
When choosing the ideal guarantor to co-sign your car finance, they must meet certain criteria to be accepted. First, the guarantor must be at least 21 years old, although some lenders may require a minimum age of 25.
The next requirement is that the guarantor must either be a British citizen or have permanent residency in the UK. They should also have a stable address history, ideally having lived at the same address for at least three years.
Having a stable income is crucial in this situation. Your guarantor must be able to prove that they have sufficient funds to cover your payments if you’re unable to make them on time. They’ll need to provide documentation to demonstrate their financial stability, such as P60s, P45s, or other reliable sources.
A strong credit history is another requirement your guarantor must meet. They will need to demonstrate a high credit score through a hard credit check, proving they’re reliable payers and don’t have significant negative marks, such as a history of bankruptcy or County Court Judgements (CCJs).
Ideally, the person you choose to co-sign the finance agreement with you shouldn’t have any existing financial ties to you. For example, your spouse isn’t a good choice of guarantor, as there may be a conflict of interest.
Advantages and risks of getting a car loan with a guarantor
As with most things in life, getting car finance with a guarantor has both advantages and disadvantages. It’s important to understand the benefits and potential risks of this type of agreement before making a commitment.
Advantages of a car loan with a guarantor
Better chances of having your loan approved: If you don’t have a credit history or if your credit score is low, lenders may see you as a higher risk. Having a guarantor acts as a form of ‘insurance’, giving lenders confidence that the payments will be made on time. This can increase the likelihood of your loan being approved.
Better loan terms: As mentioned above, lenders may view lending to someone with a low credit score as risky. Even if you find a lender willing to approve your application, they’ll want to protect themselves in case you miss payments, often by charging higher interest rates. Having a guarantor reduces the risk for the lender and could lead to lower interest rates on your loan.
Improve credit score: This is an excellent opportunity to build your credit history from scratch or boost your existing credit score. By making your payments on time, you’ll establish a positive credit record, which will gradually improve your score. Having a guarantor can help secure a more favourable finance agreement, making it easier to build your credit.
Disadvantages of a car loan with a guarantor
There could be legal consequences: If both you and your guarantor fail to make the payments, the lender could take legal action against both of you to recover the debt. Additionally, the vehicle could be repossessed, as you won’t have legal ownership of the car until the final payment is made.
Limited flexibility: Your guarantor will need to undergo a credit check, including a hard search, and their credit score and history may limit the loan options available to you.
Harm to credit score: Being a guarantor comes with risks. If you miss a payment, they’ll have to cover it, which can negatively impact their credit score since they co-signed the loan with you. Just as making payments on time helps build your credit score, missing payments could damage both your credit and theirs.
Steps to apply for car finance with a guarantor in the UK
Applying for a guarantor car finance is similar to applying for a personal loan. There are simple steps you can follow to ensure the process goes smoothly and efficiently.
Step 1: Establish a budget
Doing the maths and deciding how much you can afford for a down payment and the subsequent monthly instalments is key when starting to explore car options and finance agreements that fit your budget.
Next, you’ll need to check your credit score to determine whether you can apply for a car finance on your own or if you’ll need a guarantor to co-sign the loan with you.
Step 2: Find a suitable guarantor
As previously mentioned, a guarantor must meet several requirements before the lender will accept them as a co-signer. Make sure the person you choose meets all the necessary criteria.
Usually, people choose a family member or close friend to co-sign the loan. To preserve the relationship, it’s important to explain in detail how this type of loan works and what their obligations will be before they agree to co-sign.
Step 3: Choose a car finance provider
There are several finance providers that offer guarantor car finance. You can compare their interest rates, fees and terms and conditions. Alternatively, you can choose to sign a finance agreement directly with the car dealership where you plan to purchase your vehicle.
At Evans Halshaw, we offer a wide range of finance solutions for both used and brand-new vehicles. Feel free to contact your local Evans Halshaw dealership if you have any questions about car finance options or specific car models you’re interested in.
Step 4: Provide the documents
To proceed with the finance agreement, you’ll need to provide several documents to verify your identity, address, income, credit history, and credit score. Your guarantor will need to provide the same documentation.
Step 5: Submit your application and wait for approval
After completing all the steps above, you can submit your application and wait for the lender’s approval. If your loan is approved, make sure to carefully review the terms and conditions, your monthly payment amounts, and the interest rate you’ll be charged.
Step 6: Make the payments
This final step is extremely important; always make your payments on time every month. Failing to do so could damage your credit score and result in the repossession of your vehicle.
Can you get a car loan using a guarantor with bad credit?
To put it simply, yes, you can get a car loan with a guarantor. This type of credit agreement is commonly used by people with bad credit or those who’re just starting to build a credit history, as it gives the lender assurance that the payments will be made, one way or another.
Having a guarantor reduces the risk of non-payment from the lender’s perspective, making it easier to secure a car loan with a reasonable interest rate.
Frequently Asked Questions
Yes, most car dealerships accept guarantors as part of the finance agreement for people who haven't had the opportunity to build a credit history, usually due to young age, and those with a low credit score.
Technically, anyone can be a guarantor for a car loan. However, they must be at least 21 years old, reside in the UK and have a good credit score.
Someone willing to take on the responsibility of co-signing a car finance agreement as a guarantor could face several risks. These include potential damage to their credit score if payments are missed, the possibility of legal action if the lender pursues court proceedings, and strain on their relationship with the borrower.
Buy your next car with Evans Halshaw
When considering purchasing a car with car finance, there are several options to explore to make an informed decision. At Evans Halshaw, we offer a variety of finance solutions, including the most popular options, HP and PCP, and we can even assist those who have been previously declined for car finance.
If you’re interested in browsing for a new or used vehicle, you can explore our wide range of manufacturers and models at your local Evans Halshaw dealership. Alternatively, you can visit our blog for more advice on car finance and helpful buying guides.
