If you have a history of bad or poor credit and now require a car loan then you may find you can increase your chances of getting a good deal by using a guarantor. Our experts have access to all the car lenders and finance providers who accept guarantors. We can search the market from our appoved panel to find you the cheapest deals.
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Use a guarantor to get a car loan
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?
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.
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.
How much can I borrow?
You are typically able to borrow up to £7500 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.
Other things you need to know
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.