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How does a guarantor work in car finance?

This piece provides a clear, concise breakdown of the role of a guarantor in the world of car financing. From understanding their duties to recognising their impact on loan agreements, this blog is an essential guide for anyone involved in guarantor car finance.


Understanding the role of a guarantor in car financing is essential, especially if you’re considering obtaining a loan with the help of another party. Here’s a comprehensive guide on how a guarantor works in car finance within the UK.

What is a guarantor?

A guarantor is an individual who agrees to repay the borrower’s debt in case the borrower defaults on their loan payments. In the context of car finance, a guarantor acts as a safety net for lenders, assuring them that the loan will be repaid even if the primary borrower cannot meet their obligations.

Who can be a guarantor?

To qualify as a guarantor for car finance, an individual typically:

1. Must be over 21 years old.

2. Have a good credit history.

3. Be a UK resident.

4. Should not be financially linked to the borrower, meaning they shouldn’t have a joint bank account or loan with them. This is to ensure independence and reduce the risk for lenders.

5. Ideally, possess assets or a stable income to prove they can cover the loan repayments if required.

Why might you need a guarantor?

There are several reasons why someone might require a guarantor when seeking car finance:

1. Poor credit history: Borrowers with a history of missed payments, CCJs, or bankruptcy might find it challenging to get approved for car finance. A guarantor can provide the security that lenders need.

2. No credit history: Young drivers or individuals who’ve never taken out credit before might not have a credit score, making lenders wary. A guarantor can help in such cases.

3. Low income: If someone’s income isn’t stable or doesn’t meet the lender’s criteria, a guarantor can provide added assurance.

Responsibilities of a guarantor

Before agreeing to be a guarantor, it’s vital to understand the responsibilities:

1. Repayment: If the borrower fails to make their repayments, the guarantor is legally obligated to cover the costs.

2. Liability: The guarantor takes on the liability of the loan. This means the debt can impact the guarantor’s credit score and their ability to borrow in the future.

3. Ongoing checks: Some lenders might perform annual checks on the guarantor’s financial situation to ensure they’re still capable of covering the loan if necessary.

🚗 Read more about the responsibilities of a guarantor here.

Advantages and disadvantages for the borrower

Having a guarantor can present various benefits and drawbacks for the borrower:


1. Higher chance of approval: Borrowers are more likely to be approved for car finance with a guarantor, especially if they have credit issues.

2. Better rates: Lenders might offer more favourable interest rates when there’s less risk involved.

🚗 Further reading: Can guarantor finance boost your credit score?


1. Reliance on another person: Having a guarantor means relying on someone else’s financial standing, which can strain personal relationships if problems arise.

2. Potential for higher debt: If a borrower defaults and the guarantor also can’t pay, the amount of debt and subsequent penalties can increase.

Considerations before becoming a guarantor

If someone asks you to be a guarantor, it’s crucial to:

1. Assess your financial situation: Ensure you can afford to make the repayments if the borrower defaults.

2. Understand the terms: Familiarise yourself with the loan’s terms, including interest rates, fees, and duration.

3. Seek independent advice: Before agreeing, it might be wise to consult with a financial advisor or solicitor to fully comprehend the implications.

🚗 More information: What risks come with guarantor car finance?

A guarantor plays a vital role in car finance by providing assurance to lenders. Whether you’re considering having a guarantor or becoming one, it’s essential to understand the responsibilities and potential consequences involved.

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