If you have a limited credit history, low income, or a low credit score, getting approved for an auto loan on your own can be difficult. One option some borrowers use is a guarantor, someone who agrees to repay the loan if the primary borrower cannot. This page explains what a guarantor is, what they are responsible for, and how the role differs from a cosigner or co-borrower.
A guarantor auto loan is one where a third party, typically a family member or close friend, agrees to repay the loan if the primary borrower defaults. This arrangement is most commonly used by borrowers who are young with no credit history, have a low credit score, or have an income that does not meet a lender's requirements.
Note: Guarantor auto loans are more common in the United Kingdom. In the United States, lenders more frequently use cosigners. Some U.S. lenders may use these terms interchangeably, so always confirm the specific legal terms with your lender before signing.
By adding another individual to the transaction, the lender will be risking much less and will have a back-up plan, should you run out of finances. Now if you have been struggling to get your finances in order to get an auto loan, we'd like you to consider looking for a suitable guarantor.
The guarantor's role in this transaction is to be legally responsible for the entire value of the loan, plus all of its associated costs. More specifically, it is the guarantor's responsibility to keep track of loan fees, charges and interest. If you were to miss a couple of payments or file for bankruptcy, the guarantor will be liable to pay the remaining sum.
If the guarantor also fails to pay the value of the debt, the security (such as the vehicle or other assets) may be seized by the lender to compensate for their losses.
For this reason, before any individual can volunteer as a guarantor, they should consider the following things:
Note on credit impact: Simply agreeing to be a guarantor generally does not appear on your credit report. However, if the borrower defaults and you are called upon to repay the loan, it will be added to your credit report. Failing to repay at that point could negatively impact your credit score. Being a guarantor may also increase your debt-to-income ratio, which can affect your ability to secure other loans.
Practically anyone can sign-up to be a guarantor for an auto loan, however, typically, this is a responsibility shared by a close friend or a family member. You see, being a guarantor for an auto loan is a huge responsibility and you're basically agreeing to pay someone else's debt if they fail to do so. Plus, most of the time, they wouldn't even get to drive the car!
Keep in mind that the reliability of guarantors is always tested and you might be asked for your credit report as well. At times, you might even be asked to present proof of income, debts you owe and recent bank statements.
The amount you are approved to borrow will depend on your guarantor's financial situation. Each lender may have a different criteria set to test what may impact whether you are approved for the loan. Your employment history, credit history and income streams are perhaps the most important financial details that can paint a picture of what you and your guarantor can afford to repay.
If you were looking forward to an exact figure in this answer, you could search through the numerous auto loan calculators available on the internet.
One thing's for sure: you'll be in a very tight situation. You see, there are very strict circumstances where loan guarantors are allowed to exit the loan. For instance, your guarantor is allowed to do so before you receive any money from the lender. They can also do so before the lender sends out a notice saying that they accepted your loan application.
Guarantors are also legally allowed to jump ship if the original account signed by them was different from the finalized contract between the lender and the auto buyer. If you are a guarantor and find yourself in a situation where you can't pull out, you should seek financial and legal advice from professionals before making a decision yourself.
When you fail to make timely monthly payments, this responsibility will fall onto the guarantor. However, in the event that even the guarantor fails to pay the debt, both parties might find themselves in a problem.
In most cases, lenders are ready to settle the debt you owe by taking possession of the security against the loan, which is usually the vehicle itself. If your guarantor had offered a different security against the loan amount, these assets will also be seized.
Finally, the lender might also bring in debt collectors to the mix, and defaulting the loan could have a negative impact on your credit report.
The short answer is yes. You see, the benefit of bringing in a guarantor is that you will seem like a less risky borrower and your lender might even grant you a lower APR.
If you are a young adult, an apprentice or a student, you aren't going to have any luck with auto loan refinance rates because of your credit history. For this reason, guarantors with an excellent credit score could be favored by lenders to the point that they automatically offer them good interest rates.
Ideally, lenders favor guarantors who have stable income/employment history, positive credit history and excellent credit scores. In addition, if you do manage to pay the entire auto loan with your finances, it will reflect very positively on your credit report. In other words, you will find it easier to gain access to financial products such as home loans or credit cards in the future.
A co-borrower auto loan is simply another name for a loan that is applied for by two or more auto buyers. In other words, the person who signs-up as the co-borrower shares equal responsibility for the loan, starting right from when the loan is approved.
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Written by CarLoans.com - Last updated on 5/28/2026
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