A guide to applying for finance and the benefits of a guarantor

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If you're aged 17 or 18 looking at finance deals on a brand new car, or you're a parent looking to apply for finance for a young driver, it can be difficult to know the best way to go about it.

We're sharing how parents can help their 17 year old get behind the wheel of a brand new car and how an 18 year old can increase their chance of being approved for finance. Plus, we're looking at key benefits and questions you may have about being adding or becoming a guarantor.

Can you get a car finance deal with free insurance* for a 17 year old?

Here at Marmalade, we’re the champions for young drivers, so we offer the next best thing. 17 year olds can enjoy a brand new car and receive up to £1300 towards their first year’s insurance*. It’s not possible for a 17 year old to apply for finance, but a parent can apply for finance on their behalf.

In this situation, the car will be registered to the parent or guardian applying for finance, but the insurance would be in the young driver’s name, with a parent or guardian added as a named driver.

Getting approved for finance at 18-21 years old

Once you’ve selected your dream car and insurance deal, and you’re happy it fits in your monthly budget, the first step is getting approved for finance. As it’s likely your first major purchase, we’ll guide you through the steps you need to take.

1. First things first, you need to be sure you can afford the car – this means you need to be able to demonstrate you have a regular income. There’s little point in applying if you’re not currently working.

2. If you're aged over 18, you’ll need to apply for finance in your name. The car and insurance will be registered in your name and it gives the lender confidence that you're taking responsibility for the payments. Drivers aged 17 won’t lose out on our great car deals, as a parent can apply on their behalf.

3. If you're between 18 and 21 years old, it’s unlikely you have built much of a credit history so there are some extra steps you can take to maximise your chance of approval, like adding a guarantor.
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    Benefits of adding a guarantor

    If you're aged 18-21, you're unlikely to have built up much credit history so applying for finance with parent or close family member's support can really help increase your chance or approval and to build a good credit score:

    1. Adding a guarantor to your application should increase the chance of approval.

    2. It encourages a frank and open conversation about affordability and how you will keep up with payments with a trusted, and likely more experienced, family member. If you're going into a finance agreement with your eyes wide open, and with their support, you are likely to feel more confident.

    3. Whilst we're sure no-one intends to fall behind on payments, knowing that someone else will need to pick up the payments if you don't meet them can be a pretty good incentive to ensure you prioritise your payments.

    4. Opting for finance in your own name at 18-21 with a guarantor, rather than having a parent apply on your behalf, means that you will start to to build up your own credit score. Building a good credit profile will help improve your changes of being approved for future loans, like a mortgage for your first house!

    5. If you're a parent or family member of a young driver, acting as a guarantor enables you to guide and support them in making the right decision, and encourages open conversations in the family around managing a budget. This may mean they're less likely to get into financial difficulty.

    Becoming a guarantor - your questions answered

    What does it mean to be a guarantor?arrow
    Being a guarantor helps someone else get credit. By agreeing to be a guarantor on a young driver’s application for finance, you are essentially “guaranteeing” (or agreeing) that you will continue to repay the loan if the young driver is no longer able to make the payments.
    Who can be a guarantor?arrow
    Nearly anyone can be a guarantor, provided they are willing and able! However, we normally find it is a parent or close family member of the young driver. A guarantor should be over 21 years old, financially stable and have a good credit history. It will strengthen the application further if they are a homeowner too! Critically, anyone who choose to become a guarantor needs to be sure they can make the loan repayments, if the applicant is no longer able to do so.
    Why would I need to be a guarantor?arrow
    A first car on finance is likely to be the first major purchase a young person makes, and if they’re aged 18-21, they’re unlikely to have built up much of a credit history. Likewise, they may have a shorter employment history or low credit score. If you have a child, or family member, in these categories, adding a guarantor can strengthen their application and improve the chance of them being approved for finance.
    Can I stop being a guarantor?arrow
    Once the finance agreement has started on which you have agreed to be a guarantor, you are obliged to remain as a guarantor for the rest of the term. Exactly as you would had you taken a loan in your own name.
    Will being a guarantor affect my credit rating?arrow
    Being a guarantor in itself won’t damage your credit rating, provided the young driver keeps up with the loan repayments. However, if payments are missed on the loan this would be added to your credit file.
    Would I be a suitable guarantor?arrow
    If you are confident that the applicant is able to comfortably make repayments on the loan, and that in the event of a chance in circumstances, you would be able to cover the loan, that is a good start. To help you make the right decision, it is worth considering the following before agreeing to act as a guarantor:

    - Why do they need you to be their guarantor? If it is due to a bad credit history, can you be sure they are likely to make all the repayments?
    - Are you confident they are responsible with their money and prioritise their financial commitments effectively.
    - Can you realistically afford to, and would you be happy to, pay back the loan if don’t make their payments?
    - How would having to cover their loan repayments affect your relationship?
    Can you get car finance for 18 year olds with no guarantor?arrow
    It is possible to get car finance for an 18 year old with no guarantor, but as it is likely you will have a limited credit history, so some lenders may he hesitant. You have the best chance of being approved if you can demonstrate stability and have a sufficient and regular income to cover payments. Adding a guarantor can strengthen your application and increase your chance of approval.

    4 great reasons to choose a brand new car on finance for 17 & 18 years olds

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    The latest safety features

    Newer cars are fitted with the latest safety features and have the added re-assurance of a manufacturer's warranty, 12 months breakdown cover included and no MOT to worry about for 3 years.
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    Earn a No Claims Discount

    Our insurance uses smart black box technology that reduces the risk of the young driver being involved in an accident by 62%† - which also increased the likelihood of earning a No Claims Discount (NCD).
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    Insurance Allowance

    The first year of insurance is often the priciest, so it’s great if you don’t have to worry too much about it – which is why offer a generous insurance allowance of around £1300* to help you pay for your first year of insurance.
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    It spreads the cost

    Forking out for a first car plus tax, insurance, etc, is a big hit in one go! Buying a brand new first car on finance means you pay a fixed monthly price for a set period – with added peace of mind that it’s under warranty!

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