Guarantor For a Car Loan in Canada: Everything to Know

While Car Nation Canada can help most people access credit regardless of their credit score, there is occasionally someone who cannot get credit by traditional means. That isn’t the end of the story though as there is always a way. One way to access credit if you do have trouble is through a guarantor car loan.

 

A guarantor car loan uses a guarantor to co-sign the loan. If a borrower has an insufficient credit history or a poor credit score, using a guarantor can often help either access credit where they otherwise couldn’t or secure a better interest rate.

 

 

Guarantor Car Loans

A guarantor has to be someone you trust and someone who trusts you. As a co-signer, if you default on the loan, the guarantor has to pay or you will both be impacted.

 

That guarantor should also have a good credit score and be in good financial health. Usually, guarantors are partners or parents but can be anybody in good standing.

 

As the name implies, a guarantor’s job is to guarantee the repayment of the loan. If for any reason you are unable to repay, the guarantor is on the hook to make those payments on your behalf.

 

It’s a clear and fair system and works well as long as everyone knows their duties and obligations under the terms of the loan.

 

Advantages of Guarantor Car Loans

While guarantor car loans may not be suitable for everyone, they do have advantages.

 

They can allow those with poor credit scores or no history to access finance. They also contribute towards a credit score and can help improve or generate your score as you repay.

 

Always make your payments and a successful loan of this type can make a positive impact on your credit score as well as provide a car to drive in the meantime.

 

 

The other advantage of guarantor loans is the widening of the loan pool. Someone with a poor credit score or history may only be able to access a few lenders.

 

Someone with a guarantor in good standing may be able to access a much wider pool of lenders at much more competitive rates.

 

There is no set criteria of course as each lender does things their own way. In the vast majority of cases, guarantor loans offer better rates than poor credit car loans.

 

Both the borrower and the guarantor must make absolutely sure they are happy with the situation before signing the loan contract.

 

It is a financial contract just like any other and will be just as legally binding. If you are fortunate enough to have a viable guarantor, it is one more way to access credit.