Guaranteeing a car loan can leave you responsible for someone else’s debt if they cannot repay it. Before agreeing, read the proposed loan and guarantee documents, check the financial risk to your household and get independent legal advice.
What could you have to pay?
A guarantee may cover the whole outstanding loan and interest, rather than just a few missed repayments. If you offer an asset as security and cannot meet your obligations, that asset may be at risk.
Moneysmart’s guarantor guide also warns that guaranteeing a loan can affect your ability to borrow later, even when the borrower is making repayments. A promise to help deserves the same attention as a debt in your own budget.
What should you check in the paperwork?
Ask for the documents early and write down the questions you need answered: What amount does the guarantee cover? Does it include interest, fees or other charges? Is any property being offered as security? When can the guarantee reduce or end?
Keep the lender’s written answers with the documents. Our guide to comparing car-loan quotes can help organise the underlying loan costs, but a quote is not a substitute for understanding the guarantee itself.
Can your household carry the risk?
Work through your own expenses before focusing on the car someone wants to buy. Would covering the debt disrupt rent, mortgage repayments, essential bills or retirement plans? Include existing commitments rather than relying on money you hope will arrive.
Legal Aid NSW’s guidance on helping family financially stresses protecting your own interests and says it is acceptable to decline. A family relationship does not remove the financial risk. Be particularly cautious if your home would be used as security.
Who can explain the agreement before you sign?
Arrange a private conversation with an independent lawyer. Legal Aid NSW advises against relying only on the family member or lender’s explanation of the documents. Take the proposed agreement and your written questions to that conversation.
If cost is a barrier, Moneysmart lists legal help by state and territory. Some services have eligibility requirements, so check what assistance is available.
Aussie Loans is a finance broker. We can explain a proposed car-loan quote; an independent legal adviser can explain your guarantee obligations.
General information only, checked 17 October 2026. Your circumstances and the agreement determine your obligations; this is not personal financial or legal advice.
