Cosign Car Loan / Guarantor Options

CCX

Hi All,

I'm looking to assist a friend with bad credit rating. My credit rating is good. Looking a £5K loan over 3 years. I'm more than happy to be guarantor or co-sign (however we are at different addresses so co-sign may not be an option).

For avoidance of doubt - I'm fine with the risk involved here. Benefit is 2-fold - loan for car PLUS improved credit rating for friend in future.

Looking advice for best option (i.e. best available APR) with either co-signing / joint loan (if possible) or being guarantor (typically high APRs).

Any advice or experience here welcome,
C

[Deleted User]

Best would be to take out the loan in your name alone and for her to repay you.

The advantages are that it will have a lower rate and you won't be negatively impacted by your friend's poor credit history.

You will also have less to repay if she gives up repaying you.

She can build credit history through other less expensive and less risky means.

CCX

Thx!! Yeah thinking of that option too. If could get an APR around the 20% mark though the co-sign / guarantor option might just work too.

Gaz83

CCX wrote: »

Thx!! Yeah thinking of that option too. If could get an APR around the 20% mark though the co-sign / guarantor option might just work too.

You won't get a guarantor loan for 20%.

Companies who offer guarantor loans know that the people with the loan have histories of not paying back debts, so the APR represents this risk.

CCX

What about co-signing? Does that improve the potential APR? ...and is co-signing / joint loan even an option with any lender when not at same address? Appreciate the help!

[Deleted User]

That depends on the lender. Often not. But it's one of the more expensive and high risk options, so not sure why would want to go that route.

CCX

I'm fine co-signing - it's all about the APR :-)

[Deleted User]

Then take out your own loan. Any involvement by a high risk applicant will push up the APR.

MEM62

CCX wrote: »

I'm looking to assist a friend with bad credit rating.

Oh dear..... that how it usually starts.

CCX wrote: »

I'm more than happy to be guarantor or co-sign

CCX wrote: »

For avoidance of doubt - I'm fine with the risk involved here.

That's how it gets worse.

CCX wrote: »

Looking advice for best option

Walk away and don't get involved is the most prudent course of action. However, if you must take the risk, as advised by ZX81. Take a loan in your name and give the money to limit the interest paid and risk of your credit standing being trashed.

foxy-stoat

Deleted_User wrote: »

Then take out your own loan. Any involvement by a high risk applicant will push up the APR.

Rather than getting a loan for £5000 over 3 - loan them £2,500 over 1.5 years - they can save the money they would of paid you for the loan to put towards another car when they have finished.

Less risk for you and it may make them get into saving for stuff than dragging friends into their financial lives.

Jami74

Why does your friend need £5k for a car? At 20% I'm sure the monthly repayment would be nearly £200 and after 3 years they might have to borrow again to buy another one.

Instead, lend your friend £1500 of your own money to buy a cheaper car and they'll have paid you back within a year. Then they can carry on putting the same amount of money away towards repairs or buying the next one.