Guarantor Car Finance

What Is Guarantor Car Finance?

Guarantor car finance is a regulated agreement where two people are legally responsible for a car loan. The idea is to add someone with a better credit score who is financially stronger and can take over payments if you fall into financial difficulty. Guarantor car finance is less common today but can still be a good option for those with a poor credit history..

Marsh Finance do not currently offer guarantor car finance. We do however consider customers of varying credit scores. 

Typical Customers Who Use Guarantor Car Finance

🆕 First-time borrowers (no credit history).

❌ Recent defaults.

🌱 Young drivers.

⛔ Previously declined applicants.

How Guarantor Car Finance Works

While Marsh Finance doesn't currently offer guarantor car finance, here's the application journey that you can expect with guarantor deals.

Step 1 – You Apply

Apply either online or in person at a car dealership. At this point, a soft search will usually take place, which means no initial impact on your credit score. You’ll be asked to provide basic details, and at this point you should make the lender aware that you are looking to add a guarantor. 

Step 2 – Your Guarantor Is Contacted

Don’t worry, at this point, they are not committed. The guarantor will undergo an affordability check, and ID verifications will take place. 

Step 3 – Credit And Affordability Checks

At this stage, both parties are checked, and it goes beyond just credit scores. Your income and expenditure will be assessed, and any additional measures will depend on the lender you choose. 

Step 4 – Approval And Car Choice

This is when the dealer becomes involved. Find your car and comb through any required details. 

Step 5 – Agreement And Payment Plans

The final part of the journey is where you sign on the dotted line. In a guarantor agreement, the lender will require you to set out who’s paying every month, and who the guarantor is. The lender may outline to you both when the guarantor could become responsible for payments.

Will I Be Accepted For Guarantor Car Finance?

Car finance approval depends on your lender’s eligibility criteria and how you rank against it. Although every lender differs, eligibility usually depends on the following factors (amongst many others):

• 🚫 Missed payments. Past missed payments can hurt your chances of approval, as they show that you have failed to meet necessary repayments in the past.
• ⚠️ Defaults. An escalation of missed payments, a default is when you’ve missed payments for 3 to 6 months and your loan is closed. At this point, you’ll be reported to credit reference agencies. A default can be a massive dent in your hopes of car finance approval.
• 📂 Limited credit file. A limited credit history presents a risk to lenders, as there is no evidence that you can responsibly manage a car finance agreement.
• 💼 Job role. We commonly see self-employed applicants accepted, but lenders usually want at least 12 months of trading history and recent bank statements to show stable income.

There are plenty of other factors involved in car finance eligibility, and a guarantor can help your chances of approval. If you are someone who has one of the above issues impacting you, a guarantor with a solid credit history can prop up your application and boost your chances of approval.

Be aware that car finance is never guaranteed, and lenders promising guaranteed car finance should be steered clear of.

Situations Where Guarantor Car Finance Is Often Considered

Guarantor car finance is commonly used by people who may struggle to be accepted for a standard agreement.

This can include:

✅ Someone who has been declined for car finance before.

✅ Drivers with little or no credit history.

✅ Applicants with satisfied defaults on their credit file.

✅ People new to employment or with a short job history.

✅ Younger drivers who have not yet built a credit profile.

Having one of these situations does not guarantee approval, but a suitable guarantor can sometimes give a lender more confidence in the application.

Who Can Be A Guarantor?

Minimum Requirements

If you’re looking to be a guarantor in the UK, here are some of the key expectations you must meet:

📍 UK resident.

🔢 Over 21.

🏠 A homeowner as opposed to a tenant.

💸 Stable income.

🆓 Not financially linked to the other applicant.

Who Cannot Usually Be A Guarantor?

Here are some common cases of people who struggle to be accepted as a guarantor:

🔄 Someone who shares financial responsibility with a spouse.

📉 Someone solely relying on benefits as income.

😣 Someone in active arrears themselves.

👥 Someone who has already been committed as a guarantor on another loan.

Can A Guarantor Help With Bad Credit?

A guarantor can help customers finance a car when their score suggests they shouldn’t be able to. If a customer has bad credit, adding a guarantor with a strong credit score increases your chances of being accepted. If you fail to make payments, your guarantor steps in, minimising the chances of your credit score falling further. A guarantor can improve approval chances because the lender has a second person responsible for the agreement, but affordability checks still apply

This doesn’t mean that you can finance a car well above your financial means. Lenders still look at your financial situation and credit report alongside the guarantor’s.

Risks And Responsibilities For A Guarantor

As a potential guarantor, it’s important to know what is expected from you during the agreement.

You are jointly responsible for missed payments. This means that a failed payment can hurt your credit file as well as the other car finance applicant. This carries with it legal liability and potential punishments that can see your credit file marked down. As a guarantor, you’re entering the agreement as the stronger customer, so it’s important to be aware of what can go wrong if payments are missed.

What Happens If A Payment Is Missed?

If a payment is missed, the lender will normally contact the borrower first. Most lenders will try to agree on a payment arrangement or short-term solution before involving the guarantor.

The guarantor is usually contacted only if the missed payment is not resolved. At that stage, the lender may ask the guarantor to make the payment or help bring the account back up to date.

Formal collections action is generally a last step. It normally only happens if payments are repeatedly missed and no arrangement can be agreed upon. Because of this, being a guarantor does not usually mean you immediately have to take over the loan, but you are legally responsible if the agreement is not maintained.

Before agreeing to be a guarantor, both parties should be comfortable that the monthly payment is affordable.

Typical Requirements And Expectations

Are you thinking ‘am I wasting my time applying?’. Don’t worry, that’s a completely valid question. While Marsh Finance doesn't offer guarantor car finance, here’s what you can expect.

• Deposit expectations. In HP agreements, a deposit is common. In PCP agreements, deposits are less common and a final lump sum is needed at the end of the agreement.
• Income expectations. You’ll likely be required to have a stable income, and failing that proof of consistent funds in your account each month.
• Employment stability. A stable job is almost a necessity to lenders, as it ensures you have a monthly income to afford repayments.
• Vehicle age limits. You will likely be limited on how old a vehicle you can finance depending on the type of agreement you take out.
• Potential for some cars to be declined. You could face rejection, purely because of the car itself. Take the time to find a vehicle that fits the lender’s criteria before putting it forward.

How Lenders Decide How Much You Can Borrow

Many people believe the guarantor’s income replaces the borrower’s income. In most cases this is not how lenders assess an application.

Lenders usually assess affordability based mainly on the borrower’s income and outgoings. The guarantor acts as support for the agreement rather than the main source of repayment.

When reviewing an application, lenders may consider:

• The borrower’s monthly disposable income after bills.
• Regular commitments such as rent, credit cards, or loans.
• The guarantor’s financial stability.
• The value and age of the vehicle.
• Whether the monthly payment is sustainable.

Because of this, a guarantor does not normally allow someone to finance a car far beyond their means. The agreement still needs to be affordable for the borrower in the first place.

Marsh Finance do not currently offer guarantor car finance. We do consider customers with varying credit scores, and applying won't impact your credit score.

FAQs

What Qualifies As A UK Guarantor?

The usual requirements of a UK Guarantor for car finance:

• UK resident.
• Over 21.
• A homeowner as opposed to a tenant.
• Stable income.
• Not financially linked to the other applicant.

How Risky Is Being A Guarantor?

Both the guarantor and the other applicant are jointly responsible for payments. This can become risky if payments are missed, as both customers will face credit score and potentially financial penalties, no matter who missed the payment.

What Credit Score Is Needed To Be A Guarantor?

There is no minimum credit score to be a guarantor, but most lenders expect good credit history with no recent missed payments. If you are joining someone with a bad credit score, having as high a score as possible is key to increasing approval chances.

Will A Guarantor Be Credit Checked?

Yes, the guarantor undergoes a credit check exactly the same as the other applicant does.

Can A Guarantor Loan Be Declined?

Yes, a guarantor loan can be declined. This can happen for multiple reasons, but the most common tend to be around the car itself and whether it meets the lender’s eligibility criteria, or the applicants themselves.

Car finance can never be guaranteed.

Can A Guarantor Help If I Have Bad Credit?

A guarantor with a higher credit score can help you secure finance even if you have bad credit. Your chances alone are slim, but with a guarantor that is deemed financially responsible and credit score literate, your chances of approval increase.

Will A Guarantor Affect Their Credit?

Yes, a guarantor’s credit will be affected by finance. At final contract singings, guarantors will usually see a hard credit check on file. From here, if any payments are missed their credit score will reflect this, no matter who it was that missed payment.

Can A Guarantor Lose Money?

A guarantor becomes responsible for payments only if the borrower does not keep up the agreement. If the account falls behind and no payment arrangement can be made, the guarantor may need to make the repayments to prevent further action on the account.

Can A Guarantor Remove Themselves?

It’s unlikely that a guarantor can leave an agreement once it’s signed. The only time it could be possible is an agreement is reached with the lender, or someone else is found to take over the finance agreement.

Are Both Customers Credit Checked In Guarantor Car Finance?

Yes, both customers are credit checked in guarantor car finance.

How Long Does Guarantor Car Finance Approval Take?

It depends on your lender, but Guarantor car finance approval can take days or weeks to arrive. It’s important you research each lender before buying, to prevent you being left in limbo.

Marsh Finance does not currently provide guarantor car finance, but we help customers explore alternative car finance options that may suit their circumstances.