A loan for your car can be helpful when you want to pay for a new vehicle or repair a current one.
This can cost thousands of pounds – which is a large amount in one go. Ideally, you would save for it, but circumstances change; your car may be written-off, or you need extra seats for a growing family. That’s when a car loan could come to your rescue.
A guarantor car loan, or car finance, could provide you with enough money to buy or repair a vehicle. You then repay the loan over a length of time.
Through some loan options, if you’re buying a car, you own the vehicle. That’s not the case with a guarantor loan; the vehicle won’t be used as security or collateral for a loan. Most lenders will provide fast approval, while poor credit isn’t a deal breaker.
Having a guarantor car loan makes you a cash buyer. This could help you get a great deal on your next car – or for vital repairs.
There are four main loans available to help you pay for a new car or repair it.
An unsecured personal loan is the most common, high street option. However, if you have a poor credit rating, they can be difficult to secure. It could potentially harm your score if lenders conduct a hard search for an application if you aren’t eligible.
Payday loans provide quick approval and finance, making them popular options. Unfortunately, they also come with very high APR percentages. This means high repayment costs for only a short-term loan.
Secured loans are often easily approved by lenders because an asset, such as a house, is used as collateral. The main issue is that you could lose that asset if you fail to keep up with repayments. It is not an option to be considered lightly.
Guarantor loans are a common and easily accessible option for those with poor credit ratings. This requires a guarantor to make repayments if you can’t do so. It is a loan often built on the trust of friends or family.
If you need instant repairs to your car or a new vehicle, this is a quick way of securing finance.
If you have poor or no credit rating, this can be a stumbling block for securing a personal loan. Through a guarantor loan, you could acquire finance, despite a bad credit history.
Unlike other finance options or personal loans, there are no limits on vehicle type or mileage.
This type of loan is beneficial if you’re younger with little or no credit, and may need transport for starting work or studying.
There are a few ways that a car loan could lead to an improved credit score and financial future.
By budgeting accurately for the month ahead, you should be able to stick to your repayments on time and in full. This responsible behaviour could see your credit rating improve over time.
Through budgeting, if you are able to pay the loan earlier, you pay less interest. This could put you in a stronger position, financially. Paying-off your debt quicker should also improve your score.
As a potential guarantor, there are certain things you should be aware of before making a decision.
Buying or repairing a car can involve large sums of money, so, ask yourself whether the applicant is likely to manage the repayments. Otherwise, the burden may fall on you.
It is also important to see if you are financially able to afford the repayments on the loan if they can’t – and if doing so may harm your relationship.