What role do co-applicants or guarantors play in used car loan approvals?

Co-applicants and guarantors can play a major role in the approval process for your used car loan, especially where the applicant cannot satisfy all the eligibility criteria on their own. If your income is low or your credit history is limited, having a co-applicant may improve your odds of being approved. A co-applicant is usually a spouse or parent who participates in the loan agreement jointly along with you. You both share equal responsibility and agree to repay the loan. Both names will appear on the loan documents and, in most cases, the vehicle registration. Using the income of both a co-applicant and the applicant may allow you to qualify for a higher loan amount or better terms.

A guarantor, on the other hand, guarantees that they will pay the loan back if you do not. A guarantor does not receive rights of ownership to the vehicle and does not have a role in the day to day repayment, from the lender's perspective. The creditworthiness of the guarantor ensures that the lender will be able to collect the loan through a strong creditworthy party.

Both co-applicants and guarantors need to have a good and stable income and a strong credit history. Their participation assures lenders that repayment is occurring within trusted parties and therefore increases the chances that your loan will be approved and potentially at better terms. This assistance can be very helpful if you are first time borrower or are rebuilding your credit profile.