At My Car Credit, we understand that affording a car can be a challenge. A guarantor loan, where a third party agrees to pay your loan if you can’t make repayments, provides an alternative method of taking out car finance. Guarantor car finance is a big responsibility so it’s important you understand everything that’s involved in taking one out. Here’s everything you need to know about applying for guarantor loans.

How does guarantor car finance work?

A guarantor loan is the same as a normal loan and you are still responsible for making the agreed repayments. However, it also allows for a third party (normally a family member) to guarantee your lender the repayments (in case you fail to make them).

As such, guarantor car finance is ideal for drivers with a poor credit rating as it eliminates some risk for your provider. Lenders tend to give favourable rates to customers with a good credit score because it shows that they’re more likely to keep up with monthly payments.

On the flipside, a bad credit score or limited credit history presents you as a bit more of a risk for lenders. A guarantor car finance agreement simply means that they have an extra layer of security for loan repayments.

Your guarantor won’t have to do anything (or pay anything) for your guarantor car loan if you keep up with repayments. They’ll simply be a name on your car finance agreement. Only if you miss payments will they be called into action to pay on your behalf.

Picking a guarantor

Your guarantor can be anybody between the ages of 18 and 75 with a regular income – they don’t necessarily have to be a homeowner, but this would greatly increase your chances of being accepted. Due to the nature of guarantor car finance, it’s a good idea to make sure that your guarantor is somebody who trusts you to make the repayments, as well as somebody that you have a good relationship with.

Being a guarantor is a big responsibility – in the eventuality that you cannot meet your loan repayments, your guarantor would be liable for the debt instead. Most people tend to ask a member of their family or a very close friend.

Most importantly, it’s better if your chosen guarantor has a good credit score. Much like yours, their own credit history will be checked so lenders can see whether they’re likely to make loan payments when you miss them. It’s no use having a guarantor who will miss payments too, after all.

What they’ll need to provide us

To secure a guarantor finance agreement, your guarantors will have to go through the same checks and processes as you – they will need to provide their employment and financial history (i.e. income, bank statements, bank details), their proof of ID and potentially other documents, dependent on the lender’s criteria.

This is a standard procedure to reassure the finance lender that your guarantor is a suitable choice. Many lenders will conduct a hard credit search for both you and your guarantor, so it’s important to be aware of the impact this can have. Conducting a credit check for an unsuccessful loan application too many times can negatively impact their credit score, as it shows up on their credit file.

At My Car Credit, we always start with a soft credit check, which gives us an idea of suitability before proceeding with the application. This minimises the risk of you and your guarantor being rejected due to poor credit history. Please however be aware that should you progress, some lenders may perform a hard search on your credit files.

Once you and your guarantor have been accepted and all the boxes have been ticked, most guarantor loans are paid out to you within 48 hours.

Additional advantages of a guarantor car finance loan

Cost savings

The security of a guarantor loan for the lender means that you may be offered a lower annual percentage rate (APR) than you could obtain elsewhere. An APR is the money you have to pay in interest for borrowing money from a lender. It affects how much is added to each monthly payment on top of the cost of the car.

In simple terms, this means you’ll pay less in interest and less overall for your car finance deal.

Building your own credit rating

A guarantor loan means that you can build and improve your own credit score for the future, because (in theory) you should always make the monthly payments. This means that your chances of being approved for finance will be improving as you go along.

If you apply for car finance in the future, you might not need a family member as a guarantor. Strong credit history is also advantageous for things like personal loans and mortgage applications.

More likely to secure car finance

Choosing to take a guarantor loan can make it more likely for you to be accepted for car finance. Put simply, this is because having a guarantor makes you a much safer bet for a lender. It gives them a reliable back-up option that they can approach for payments.

This is another long-term advantage for your credit score, because continual rejections can contribute to bad credit. Choosing guarantor car finance means you could be accepted and avoid all those rejections showing up on your credit file.

What happens if you fail to make the repayments?

Failure to make your monthly repayments will mean that your guarantor will be liable instead. They will be expected to make the monthly repayments on your behalf. Should they also fail to make the repayments, both of you could be issued with a County Court Judgement (CCJ). This will impact both your credit profiles, as well as affect your abilities to obtain credit in the future.

A guarantor loan can be a good solution for certain circumstances but it’s important to remember your obligations to both your guarantor and the lender. Alternatives to guarantor car finance include:

Taking a higher interest rate

Going it alone rather than using a guarantor might not mean you’ll be rejected for car finance, but it could mean securing car finance with a higher APR. This simply means you’ll pay a little more than finance with a guarantor, because lenders don’t have that safety net for missed payments.

Shopping around

Remember that having bad credit or being a young driver with a limited credit history doesn’t mean you’ll be unable to secure finance. There are lots of lenders out there, each with their own criteria for car financing. Using a car finance broker like My Car Credit gives you access to lots of finance providers without the extra legwork that uses up your time.

Ready to take the next step?

If you feel that a guarantor car loan is the best option for you, why not check out our online car finance calculator to see if you are eligible, or, click and apply here with My Car Credit today.

Rates from 9.9% APR. Representative APR 12.4%

Evolution Funding Ltd T/A My Car Credit

My Credit Rating


  • You are a home owner
  • You have been on the electoral role for a long period of time
  • You have current credit arrangements and mortgage with no defaults
  • You have no CCJs, credit arrears or missed payments
  • You rarely apply for credit
  • You are employed or self-employed


  • You are on the electoral role
  • You are a home owner or long standing tenant
  • You have a stable employment history
  • You have current credit arrangements with occasional missed payments
  • You have no CCJs


  • You are or have recently been on the electoral role
  • You may have recently changed address
  • You may have occasional missed payments
  • You may have an old CCJ
  • You may have regularly applied for credit


  • You may have had frequent changes in address
  • You may not be traceable on the voters roll
  • You may have exceeded credit card limits
  • You may have missed payments on current agreements
  • You may have had a CCJ in the past


  • You may not be traceable on the voters roll
  • Your credit cards are over their limits
  • You have recent CCJs
  • You may have been refused credit elsewhere
  • You may be in a debt management plan

X monthly repayments of

Typical rate

Loan amount

Total payable




*for illustration purposes only

No impact on your credit score*

Representative Example

Borrowing £7,500 at a representative APR of 12.4%, annual interest rate (fixed) 12.36%, 47 monthly payments of £196.44 followed by 1 payment of £206.44 (incl. estimated £10 option to purchase fee), a deposit of £0.00, total cost of credit is £1,939.12, total amount payable is £9,439.12.

Evolution Funding Limited, trading as My Car Credit, is a credit broker and not a lender.

Please ensure you can afford the repayments for the duration of the loan before entering into a credit agreement.

*Initial application is a soft search. Should you progress, some lenders may perform a hard search on your credit file.

Require more help?

Got a question you can’t find the answer to, or need some advice and guidance around taking out car finance? Our Car Credit Specialists are friendly, experienced, and here to help so get in touch today!