Why A Guarantor Loan May Negatively Affect Car Finance
Lenders see guarantor loans as higher risk than other types of car finance and so they tend to avoid them when assessing an individual’s creditworthiness for car finance.
This is because if a borrower fails to keep up with their loan repayments, the lender can pursue their guarantor for repayment instead. As such, many lenders will view applicants with guarantor loans unfavorably and so are more likely to reject an application for car finance from an individual with such a loan in their history.
That said, depending on an individual’s financial circumstances, some lenders may still be willing to consider applications for car finance from individuals with a guarantor loan in their history. For example, if the applicant has been keeping up with their guarantor loan repayments then this could help increase the likelihood of being approved by certain lenders.
Search for a Suitable Lender
When researching potential lenders, it is important to remember that each lender has different criteria when assessing applications and so it is important to find one who will take into account your particular situation. It may also be beneficial to speak to a financial advisor who can help provide further advice about which companies may be more likely to approve you based on your personal circumstances and credit score.
Additionally, paying off any existing debts (including guarantor loans) before applying for car finance could help improve your chances of being accepted by some companies as this would demonstrate that you are responsible and able to manage your finances effectively.
Do All Lenders Offer Loans That Require A Guarantor?
Not all lenders offer loans that require a cosigner or guarantor. It’s important to do your research and weigh the pros and cons of each option before deciding on a lender for your car finance application.
A guarantor loan is one such type of secured loan where an individual agrees to be legally responsible for repaying the debt should the borrower (you) fail to pay it off in full. This means if you are unable to repay the loan, then the guarantor will become liable for it instead – so make sure you are both clear on the details of the loan before signing anything.
Conclusion
Applying for smaller amounts or shorter terms could help increase the chances of approval as these would generally represent less risk for the lender. Ultimately however, it is important that all prospective borrowers consider their own financial situation carefully before making any decisions regarding taking out car finance in order ensure that they can keep up with all regular payments without falling behind and damaging their credit score further down the line.
🚗 Read more: What happens if you change guarantor during the finance period?
