Use a guarantor to get a car loan
Get a car loan with the help of a guarantor
If you have a bad credit score, or even no credit score, and you are trying to get a car loan you could well find yourself facing some very high interest rates. This is because the loans that you will be able to get are seen as high risk loans, and so the interest rates are set very high to reflect this so that lenders make back their money sooner rather than later in case you default on the loan. As these loans are generally unsecured loans the lender is not able to repossess any of your belongings in order to recoup the loan if you default on your payments.
How does a guarantor loan work?
Guarantor loans are an alternative option
A guarantor loan is very much as it sounds. In order to get a guarantor loan you will have to find someone who is willing and able to act as guarantor for you. They need to be fully aware that should anything happen and you are not able to continue making payments on the debt that they will then be liable for the payments on the remainder of the debt. This is particularly important to understand on larger loans that are taken out over a longer term.
Interest rates
As you have financial backup in the form of a guarantor you will find that you will be able to get loans at much lower rates than other unsecured loans that are not from mainstream lenders. It is worth shopping around as you will find that interest rates tend to range between 40% and 50% over the term of the loan, which is normally between 1 and 5 years.
Calculator – How much can I borrow?
You may be able to borrow up to £10,000 on a guarantor loan, which is usually enough to allow you to buy a new car, however you are free to borrow less than this and any amount that you do borrow will have to be agreed with your guarantor. You should also note that this limit is likely to be higher than if you were to take out other types of poor credit loans.
This calculator will give you an idea of costs. The exact amount and APR payable will be provided from the lender subject to credit and affordability checks.
Your monthly payment will be:
£136.90
Interest on this loan will be:
£714
Annual Percentage Rate (APR):
3.7%
Total repaid will be:
£8,214
Other things you need to know
Ensure you can afford to repay the loan
As with any loan you should do as much preparation as possible. You should look at your finances and figure out exactly how much you would be able to pay each month as a monthly repayment and use this to then calculate how much you can afford to borrow. You should not base your loan application amount on how much your guarantor is able to afford to repay! Once you have basic figures you can use a loan calculator to help you work out how much you can borrow, the interest rates you will pay and the length of the loan. If you do this then you are much more likely to be able to repay the loan successfully, which not only means your guarantor is not affected, it also means that your credit score will also improve.
