Short answer: With a guarantor car loan, a second person, usually a parent or close family member, promises the lender they'll repay the debt if you don't. That can help if your income, credit history or employment is thin. But the guarantor takes on real legal liability, and the lender can pursue them for the full amount owing if you default.
How it works
You're the borrower. You own the car and make the repayments. The guarantor signs a separate guarantee. If you fall behind and don't fix it, the lender can ask the guarantor to pay. Depending on the guarantee, that can include arrears, the remaining balance, interest and enforcement costs. The lender can also repossess and sell the car, and the guarantor may be liable for any shortfall.
| Guarantor | Co-borrower | |
|---|---|---|
| Named on the loan as a borrower? | No, signs a guarantee | Yes, jointly liable from day one |
| Owns the car? | No | Often co-owns it |
| Liable for the debt? | If the borrower defaults | Always, jointly with the other borrower |
Who can be a guarantor
Each lender sets its own rules, but guarantors are often:
- Over 18, and usually a parent, partner or close relative
- Able to show enough income or assets to cover the loan if needed. Many lenders prefer a property owner.
- Holders of a clean credit history. A guarantor with credit problems can weaken the application. See how a poor-credit guarantor affects your application.
Not all lenders offer guarantor car loans, and some cap the loan amount.
What guarantors should know before signing
- Read the contract and the guarantee. Under the National Credit Code, the lender must give a prospective guarantor certain information, including a copy of the credit contract, before the guarantee is signed.
- Get independent advice. Some lenders require it. Either way, a solicitor can explain exactly what you're agreeing to.
- It can affect your own borrowing. Future lenders may count the guarantee as a potential liability.
- Relationships change. Think about what happens after a break-up or falling out. Being released usually requires the loan to be paid out or refinanced.
- You can generally withdraw before the credit is provided, but not afterwards.
Is a guarantor the right move?
It can make sense for a first car when the borrower has steady income but little credit history. It's riskier when the repayments would be tight anyway. A guarantor doesn't make an unaffordable loan affordable. Alternatives include a cheaper car, a larger deposit, or waiting until your employment or credit history is stronger. If you're renting and would rather not involve family, see car loans without a guarantor.
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General information only. This isn't financial advice. Finance the Ride is a referral service and doesn't hold an Australian Credit Licence. Last reviewed September 2026.
