Having a guarantor to support your car finance application can be a good way of increasing your chances of approval. However, for many drivers it can be hard to find someone to support your application or many lenders won’t offer this service. So, if you’re wondering how to get a car on finance with no guarantor or co-signer needed, the guide below outlines 5 top tips to help see easier acceptances.
What is guarantor car finance?
A guarantor is someone who agrees to support your car loan. Your guarantor promises to meet the monthly repayments if you fail to do so. If both you and your guarantor fail to repay, both of your credit files can be affected, and it can lead to more serious financial implications. A guarantor is usually a friend or family member who trusts you to make your payments but can pay your loan if you can’t. From a finance lenders point of view, guarantor car loans are less risky as they are essentially getting two chances for the loan to be paid back.
Why might you need a guarantor?
A guarantor can be handy if you are struggling to get approved for finance on your own. In some cases, you may need a guarantor to help support your application if you have a bad credit history, low income or have little evidence of previous borrowing.
- Bad credit. When you have a bad credit score, it usually means you have had trouble meeting repayment deadlines in the past. Based on your previous history, you are more of a risk to lend to as you’re more likely to default on future loans or finance.
- Low income. Most lenders will require you to undergo an affordability assessment before you can get a car loan. This helps them to assess whether you can afford a car on finance and how you’re going to pay your loan back. It would be unethical of lenders to lend to anyone who can’t afford finance but if you can prove your income, it can be possible. A guarantor could also be used to help support your application just in case you miss any payments due to limited income.
- Age. When you’re a young driver, you may have a limited income or have little credit history. A limited credit history can make it harder for lenders to predict which type of borrower you will be. In this case, many newly qualified drivers may use guarantor loans to help increase approval rates.
How to get a car on finance with no guarantor needed:
Drivers may be put off by guarantor car loans as they can sometimes means higher interest rates. Interest rates reflect the cost of borrowing, and a higher interest rate can make buying a car more expensive. Due to your previous history of borrowing or adverse income, lenders may set interest rates accordingly and a higher interest rate can help to secure the deal, which may not be the most competitive rate. It can be possible to get a car when you have bad credit with no guarantor needed but there are a few factors that you can consider first to help get a better deal.
Check your credit file.
Many drivers apply for finance without even knowing their credit score or what information is recorded on their credit file. It can be a good idea to get into the habit of checking your score and report to see how you’re doing. When you check your credit report you should make sure all your information is accurate and up to date as negative information on your credit file can be affecting your score. If the information on your report doesn’t match that of your car finance application, lenders may also be worried that it’s a fraudulent application in your name. You can contact the credit referencing agency who provided your credit report to make any changes.
Make payments on time.
Before taking on any more credit or finance it can be a good idea to show you can be trusted with any other financial commitments you may have. In the run up to buying a car, you should make sure all your current repayments are made on time and in full to show evidence of responsible borrowing and also to help increase your credit score. If you don’t yet have a credit history, it can be a good idea to get a small credit account in your name, this can be as easy as a mobile phone contract and paying it back each month on time.
Reduce your credit usage.
Your credit score considers how many accounts you currently have open and also how much debt you owe. People with good credit scores tend to have low levels of credit but use credit little and often to show evidence of handling finance correctly. If you have high levels of existing debt, it can be a good idea to try clear as much as possible, not only will it improve your score, but it can also increase your affordability.
Save for a deposit.
A car finance deposit is not needed for many car finance agreements but putting some money down at the start of your agreement can be beneficial. A deposit for agreements such as HP and PCP can benefits from a higher deposit as it helps to reduce the loan term, this can be attractive to lenders as they don’t have to lend you as much and reduces the risk. A smaller loan can also mean lower monthly payments or a shorter loan term which means you can pay it off quicker.
Use a car finance broker.
More drivers than ever are putting their trust in car finance brokers to help get them a car loan with no guarantor. There are bad credit brokers who work with trusted lenders in the UK and their bespoke lending panel can help to get you approved. Brokers work on your behalf to find the most suitable car finance package from a range of lenders and can save time and money when it comes to shopping around for the best car finance deal.