What are guarantor loans, and how can they help me finance a new car? | AA Cars

The majority of cars are now bought on finance, and payment options available on a new car have never been better. 

But if you have a poor credit history, it can be tricky to get approved for car finance. That’s particularly true for young people or if you’re taking out a loan for the first time.  

If you’re struggling to get a traditional finance arrangement, you might want to consider a guarantor loan to help you get behind the wheel of a new car.

Here’s what you need to know about them, and how they could help you. 

Try taking out a regular finance agreement first

Before looking at guarantor loans, you should always check to see if you could get approved for a regular finance agreement, even if you think you might have a poor credit score. You can do this through AA Car Finance.

When you apply for finance, the provider will run various checks on you. They’ll examine your credit history and look at your finances, to check whether they think you’ll be able to pay on time. But if you’ve previously missed payments or got into money trouble, providers might reject your application. 

This is when you should look at guarantor loans. They’re usually personal loans used to pay for the car – rather than being used for a PCP or HP car finance option.  

What is a guarantor? 

A guarantor is another person that essentially guarantees that you’ll be able to repay a loan if you miss or default on a payment.  

A guarantor is typically a family member or a close friend, and they’ll have to meet certain requirements to be able to act as the guarantor. 

What requirements does a guarantor have to meet?

Guarantor terms and conditions can vary depending on contract, but the requirements are the same for most loans. 

It’s recommended to ask a close family member or friend to be your guarantor. But if they’re financially linked to you – a partner, for example – they’re not usually able to act as the guarantor.

Guarantors are also typically required to be 21 or over, and they must have a good credit history themselves. This means that they’ll have a track record in repaying loans on time. It also helps if they’re a homeowner, too – though they might still be considered if they can show they’ve always been reliable with their home rent payments.

As a guarantor, they’ll be expected to provide information about themselves and their finances – including bank statements, financial details and various forms of ID.  

What should someone consider before being a guarantor?

There’s a lot of trust involved in being a guarantor. If you’re asked to be one, think long and hard about whether you believe the person will be able to make their payments on their own. 

Because if they don’t, you’ll be the one paying. You need to consider whether you can afford their repayments, as well as your other bills. If you, either as the guarantor or borrower, defaults on payments, you can face legal action and damage to your credit score. 

What’s the benefit of guarantor loans?

For most people, using guarantor loans to pay for a car is a last resort, so the key benefit is that you’re able to get behind the wheel of a new vehicle. 

It works best if you’re young, have a limited credit history or haven’t kept up with payments in the past. Proving you can make consistent repayments on your guarantor loan can help build your credit score. It might also allow you to qualify for other finance options in the future. 


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