Car finance without a guarantor
Car finance without a guarantor means that no one else is liable for the outstanding debt if you fail to meet your contractual payments.
Let’s explore some car finance options that don’t require a guarantor when you have a good credit rating.
Personal loan
This finance option allows you to borrow a lump sum to buy a car, which you then repay in fixed monthly instalments.
A personal car loan can be a straightforward form of borrowing that gives you full ownership of the car right away. However, you’ll need to have a good credit score to get the best interest rates.
Hire purchase (HP)
With hire purchase agreements, you get to spread out the cost of a car over one to five years. You start off with a deposit, then make regular monthly payments until the car is fully yours after the final payment.
Getting approved for HP may be easier than a personal loan, because the car itself acts as security for the loan.
Personal contract purchase (PCP)
Personal contract purchase agreements can offer lower monthly payments and more flexibility at the end of your contract. You can return the car, pay a final amount – known as a balloon payment – to keep it, or trade it in for a new one.
This financing option can be a good idea if you like to change your car frequently and want to keep your monthly payments down.
Thinking about getting car finance without a guarantor? Here’s what you need to know about whether or not your application will be accepted.
Age
You usually need to be at least 18 years old to apply for car finance. Some lenders may have a higher age requirement.
Income
A stable income is essential. Lenders want to be sure you can afford the monthly payments, so having a regular job or a reliable source of income helps a lot.
Credit score
A good credit score improves your chances of approval. It shows lenders that you’ve managed credit well in the past. Even if your score isn’t perfect, some lenders specialise in helping people with less-than-ideal credit ratings.
Employment status
Being in full-time employment can boost your application. However, part-time workers, self-employed people and those with other stable income sources can still get car finance. Your lender might just need a little extra information from you.
Some of the benefits that may come with securing car finance without the help of a guarantor can include:
Greater independence
You won’t need someone else to co-sign your loan, giving you more control over your finances. The independence that comes with car finance without a guarantor can be empowering. It also helps you avoid any potential issues with friends or family who might act as guarantors for you.
Flexibility in choosing a car
Without a guarantor, you have the freedom to choose whatever car you like, as long as you can afford it. You’re not restricted by someone else’s financial situation or credit history.
Privacy
Your financial matters stay private when you choose car finance without a guarantor. There’s no need to share details of your financial situation with anyone else.
It’s worth noting that not having a guarantor can impact the terms of a finance agreement. You might encounter slightly higher interest rates or stricter loan conditions because the lender takes on more risk without a guarantor. In some cases it may be challenging to get car finance without one.
While car finance without a guarantor can have its benefits, as with most things, there are a few factors to consider.
Higher interest rates
Without a guarantor, lenders can be taking on more risk. This means that you could face higher interest rates, which can make the total cost of your loan higher.
Stricter eligibility criteria
Lenders may have stricter criteria for approving loans without a guarantor. You might need a higher credit score and a more stable income to qualify.
Limited options
Not having a guarantor could limit the types of finance options available to you. Some lenders may only offer their best deals to those with a guarantor, so you might miss out on more favourable terms.
Despite these drawbacks, many people still prefer the independence and privacy of financing a car on their own. It’s important to weigh up all these factors and choose the option that best fits your financial situation and needs.
If you’re looking to apply for car finance without a guarantor, we’ve got some helpful tips on getting approved.
✔ Improve your credit score
Pay off any outstanding debts and make sure you pay your bills on time to improve your credit score. A better credit score can mean better terms.
✔ Save for a larger deposit
A bigger initial deposit reduces the amount you need to borrow, which can lead to better interest rates and lower monthly payments. This reduces the total cost of your loan.
✔ Compare different finance options
As tempting as it might be, don’t settle for the first offer. Shop around and compare loans, HP agreements, and PCP deals to find the best fit for your financial situation.
✔ Check eligibility criteria
Make sure you meet the lender’s requirements before applying. This includes age, income and employment status.
✔ Get pre-approved
Consider getting pre-approved for a loan. This gives you a clear idea of your budget and strengthens your position when negotiating with dealers.
Common misconceptions about getting car finance without a guarantor
There are some common misconceptions about getting car finance, but we’re here to help.
Poor credit equals rejection
While having poor credit can make it harder to get approved, it’s not impossible. Many lenders offer options specifically for people with less-than-perfect credit histories.
Limited options
Some believe that without a guarantor, they’ll only get high-interest loans. In reality there are various finance options available, though terms might vary.
Higher down payments
Many people often think they need a large deposit. While it’s true that a bigger deposit can lower monthly payments, it’s not always a requirement. Most lenders will ask for a deposit that’s at least 10% of the car’s value.
Complex process
You may think that the car financing process is more complicated without a guarantor. However, it can be pretty straightforward if you meet the lender’s criteria.
Understanding these things can help you navigate car finance more confidently. With careful planning and research, hopefully you can find a suitable finance option that suits you.
Ready to get started?
Car finance without a guarantor allows you to secure a loan for a car purchase independently, without needing someone else to co-sign.
Curious about your options? Get a car finance quote (representative APR 16.9%) from Oodle today and take the first step towards getting behind the wheel of a new car.
