So, what are your alternatives? While some lenders specialise in providing auto loans to individuals with terrible credit or no credit, those loans can be more expensive. An alternate option could be to apply for a guarantor vehicle loan.
A third party guarantees the loan on your behalf when you apply for a guarantor car loan. This simply indicates that they will repay the debt if you are unable to. So, under what circumstances would a guarantor be required in order to apply for a car loan?
A guarantor could help you acquire a car loan if you meet the following criteria:
When a guarantor agrees to act as guarantee on a car loan, he or she assumes legal responsibility for the full amount of the loan, plus any associated expenses.
So, while you, as the applicant, are responsible for ensuring that the loan, interest, fees, and charges are paid, if you default, your guarantor may be expected to cover the remaining balance owed.
If your guarantor is unable to pay this obligation, creditors may confiscate security (such as the automobile or other assets) to repay the lender’s losses.
Who should you ask to be a guarantor on your Auto Loan? While you might ask anyone to be a guarantor on your auto loan, it’s a good idea to put some thoughts before making any decisions.
To begin, your guarantor should have a strong credit. They are guaranteeing to repay your loan if you are unable to, so the lender wants to know that they can trust your guarantor.
Second, your guarantor must meet the provider’s eligibility requirements for the car loan. Again, since your guarantor is the backup on your loan, the lender needs to know whether they are a responsible choice.
Finally, it’s normally better if your guarantor is a close family member, such as a parent or spouse. Being a guarantor is an important financial responsibility. If you fail to pay off the loan, you will destroy your guarantor’s credit standing while also running the risk of jeopardising your relationship.
Don’t jeopardise your credit, your guarantor’s credit, or your connection with your guarantor just to get a car. Check out these pointers to ensure you and your guarantor are making the appropriate decision.
• Create a budget and utilise a vehicle loan calculator to figure out how much you can afford to borrow and how long your payback schedule should be. Calculate your savings to see much much money you have.
• Before you choose a guarantor, examine your relationship with them and if you want to be financially obligated to them for the duration of your auto loan.
• Ensure that the guarantor you choose has strong credit and meets the conditions of the car loan.
• Seek legal counsel if you are unsure about the procedure
A guarantor can only exit a loan under specific circumstances.
• before the applicant receives any money from the lender
• before notice has been sent from the lender accepting the application
• if the finalised contract is different from the original document signed by the guarantor
The rules remain the same. There is no way to withdraw your guarantor from your car loan unless your scenario comes under one of the conditions listed above.
Your only choice is to pay off the car loan and refinance to a new loan without a guarantor. This is achievable if you have paid all of your payments on schedule and have tried to improve your credit since applying for the vehicle loan.
Do you believe a guarantor vehicle loan is right for you? Contact Automotive Finance Australia today to see how we can assist you!