A guarantor takes responsibility for the debt if you are unable to make payments and agrees to pay off any remaining balance due in full. So who can be a guarantor for a car loan?
Who Can Be A Guarantor?
The guarantor must have their own good credit standing, as well as the capacity to make loan payments if necessary. They should also have a full understanding of all the financial implications before agreeing to act as a guarantor.
In some cases, lenders may require that a parent or spouse is the guarantor for the car loan. This is especially true if you are young and/or lack sufficient income to cover repayment costs. Other family members such as grandparents and close friends may also be acceptable in certain situations.
Understand The Risks
It’s important to note that being a guarantor for a car loan is a risky business. The lender considers the guarantor responsible for any debt not paid off by you, so they need to be absolutely sure they can trust you to make your loan payments on time. That’s why lenders usually require the guarantor to have good credit and/or a substantial amount of money saved as collateral, in case they need it.
If you’re not sure if someone is suitable as a guarantor for your car loan, it’s always wise to speak with the lender before making any commitments.
🚗 Read more: Will having a guarantor affect your car finance?
What are the Requirements to Become a Guarantor for a Car Loan?
In order to partake in a guarantor car loan, potential guarantors must meet certain requirements set out by the lender. Generally speaking, guarantors must:
- Be at least 18 years of age (21 in some cases)
- Have a good credit history and score
- Pass an affordability assessment with the lender
- Own their own home or have some form of security against the debt (such as savings)
- Show evidence of stable income such as employment records or bank statements
- Have sufficient funds available to cover any repayment if necessary.
It is important to note that each individual lender may have their own specific requirements regarding who can be a guarantor and what kind of security they require. It is therefore important to speak to the lender directly and find out their requirements before offering your services as a guarantor.
Ultimately, finding an appropriate guarantor can be a challenging task but it may help you get approved for a car loan if you are unable to do so on your own. Just ensure that everyone involved understands the risks and obligations associated with taking on this responsibility. With proper research and strategic decision-making, you can increase your chances of obtaining the car loan you need while protecting both yourself and your guarantor.
🚗 You might like: A complete guide to guarantor loans.