You have to remember that whenever you’re thinking of buying a car, which is an important milestone for every adult, you might have to apply for a loan. This is because not many people especially those who have just started their career would have enough money to actually buy a car. Since you would be new to the lending market, you might also be asked to provide a wide variety of references. Furthermore, there are many car loans with a guarantor. In fact, many companies tend to provide these kinds of loans only.
If you want to understand more about this, then you need to understand that this is the type of loan where a third party who could be a family member or a friend will guarantee the repayment of the amount borrowed in case you are unable to meet the payments. Therefore, the initial part of the loan would actually be provided to the guarantor who would then release the money to you. However, since you would be the borrower, you would have to make the loan repayments directly to the lending institution.
You might be wondering as to how this kind of loan works. Car loans with a guarantor work in simply the same way as other forms of finance do. However, in this kind, there is a third party who has become involved who will take the final responsibility for the repayment of the loan. You have to also remember that in this loan, you can easily buy the kind of car that you want, or pay for the insurance or even road tax. There are no restrictions at all in the way that you can spend the money. You have to understand that there is a third party involved so this is simply not a two-way relationship.
There are many people who might not have a perfect credit history or who are just starting out and therefore, are having problems in getting approved for such loans. For such people, these car loans with a guarantor might be just perfect. Moreover, you have to remember that you might not need a guarantor in case you rebuild your credit score eventually when you keep with the repayments.
You also have to understand that in case you default on the repayments, you would get issued county court judgments (CCJs). Even your guarantor will be issued that. This will make it difficult for both of you to get credit in the future. Therefore, you should always seek to make the repayments on time. You would not want to disturb the relationship that you enjoy with your guarantor who generally would be a close friend or a family member.
You will find that the guarantor would have to be homeowner in most cases. Therefore, if you have exhausted other options of finance, then you can opt for this kind of loan. Remember that you just do not have an obligation to the lender, but also to the guarantor in this kind of loan.
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