Can a Parent Finance a Car for Their Child?
Your child getting their license is a significant milestone and being with them to get their first car is an exciting time. However, you may be wondering if you can finance their car for them. The answer isn’t as simple as you may think. You have various options when deciding to finance your child’s car, and we are happy to go through them here with you. As always, if you have any questions, feel free to contact us here at Taz Loans, and we’d be happy to walk you through the financing process.
Like a typical loan, guarantor loans require monthly payments toward vehicle ownership. The difference between this and typical financing is that your child is responsible for the payments and has you as a backup payee if they miss a payment or cannot pay the monthly amount. A guarantor loan is a big responsibility for you and your child as lenders still expect to be paid the entire monthly amount owed as outlined in your financing contract. Choosing a guarantor loan will increase your child’s loan acceptance rates and could provide you with lower monthly payments.
Another option is a joint application which enables you and your child to make payments toward the vehicle. This is an excellent option for those whose child has a steady income but a relatively low credit score. Both parties are responsible for upholding the repayments; if one cannot meet their financial commitment, the other must cover that amount. This is an excellent opportunity to give your child financial responsibilities and build their credit score. It can also help build your credit score as long as payments are made on time and in full.