What is guarantor car finance?

Not to be confused with guaranteed car finance, guarantor car finance is a type of specialist car finance product which involves someone else agreeing to make the necessary repayments if you're unable to do so for any reason. A popular option for individuals that wish to borrow in order to enjoy a new or used car, but whose current financial circumstances are such that they represent a relatively high risk, a suitable guarantor may reduce the  lending risk to an acceptable level. Let's take a look at the type of people for who guarantor car finance might be an option to consider, the type of people who make good guarantors and how the process might work.

High-risk borrowers
When you apply for a car finance product through us, the information you information you enter on our application form is used to match you with a lender or broker. Each lender or broker assesses the information, using their own, individual risk criteria.  Following the assessment, they are then in a position to see what level of risk you represent; low risk borrowers are statistically most likely to repay the loan on time, high risk borrowers, least likely. Although each lender may give a slightly different weighting to a particular risk factor, generally the type of circumstances that cause your risk to be elevated include:

• a previous history of delayed repayment or non-repayment of loans, credit cards, store cards, catalogues or similar consumer borrowing
• defaulting or falling behind on mortgage repayments
• failing to pay Council tax, tax or other legally required payments
• falling behind on utility bills, broadband payments or similar essentials
• CCJs
• bankruptcy
• not having borrowed much previously (this sounds strange, but obviously if you haven't borrowed before, lenders have no real way of knowing what type of risk you represent)
• failing to make sure you're on the electoral register
• frequent house moves
• frequent credit searches (several credit searches by a variety of lending companies in a short space of time, none of which are successful, may suggest that you're struggling financially and are desperate to borrow)

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Representative example:

Cash Price £7,500, borrowing £7,500 with £0 deposit and £0 charges over 48 months with an interest rate of 22.4% per annum fixed. Representative 22.4% APR fixed, the amount payable would be £234.75 a month, with a total cost of credit of £3,768.00 and a total amount payable of £11,268.00.

Many people face these types of issues, meaning that on their own they represent a high lending risk. The risk can be reduced by using a guarantor who is considered to be a low risk. A low risk guarantor's financial profile is basically the opposite of a high risk profile. Guarantors need to have no current or previous defaults, have proven that they are able to successfully repay previous finance on time, have a reasonable income and have clear evidence that they are settled at an address which is not connected with debt.

To act as a car finance guarantor, the individual has to agree to meet your repayments (even if they run into thousands of pounds), if you're unable to do so. For this reason guarantors are often family members or close friends.