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Tenant guarantor loans, in essence, are guarantor loans where both the guarantor and the primary applicant can be a non-homeowner or a tenant. If you apply for a guarantor loan as a tenant with a low credit score, the lender may ask you to bring a guarantor to co-sign the loan. A guarantor is a close friend or family member who participates in the loan’s repayment responsibility with you.
Now, if you fail to oblige to the loan’s terms and conditions by defaulting on the loan, the liability of repayments will fall on your guarantor. Your guarantor can be a homeowner or a tenant, meeting the following criteria:
How does a tenant guarantor loan for non-homeowners work?
Normally, when you apply for an unsecured personal loan with a below-par credit score or low income, lenders might ask you to present a guarantor to back your loan. However, you could also find onboard a guarantor if you’re looking to get low-interest rates or borrow a more significant loan amount.
Once your non-homeowner guarantor co-signs the loan, they agree to partake in the loan’s obligations, such that the onus of repayments falls on the guarantor if you fail to repay. While the primary borrower will face severe credit score damage, missing refunds on loan could also be detrimental to the guarantor’s credit score.
Since your application heavily relies on the guarantor’s credit, lenders normally require that the guarantor has a decent credit score and steady income. Following your approval, the guarantor and you will need to complete certain contractual formalities. Following this, the lender will transfer the funds directly into your bank account. It will help if you use this credit responsibly.
What can I use a tenant guarantor loan for?
You can use a tenant guarantor loan for whatever you like. However, you should spend the money very responsibly since a cosigner is involved in the loan. Generally, you can use a tenant guarantor loan to:
What to consider: Tenant guarantor loans vs. tenant personal loans
In a guarantor loan, a friend or family member guarantees the loan on your behalf. Homeowner guarantors are preferred over tenant guarantors by some lenders for several reasons, such as:
However, it is now common for lenders to accept tenants as guarantors. Any guarantor or borrower could default or miss repayments, regardless of whether they’re a homeowner or not.
As a guarantor, you can improve your credit score by paying your household bills and clearing your credit card debts on time. You can typically apply for a tenant guarantor loan in these circumstances:
What to consider before borrowing a tenant guarantor loan?
Consider the following factors when choosing a tenant guarantor for a guarantor loan:
Is this a suitable loan amount for me? Figure out how much you can borrow if you have a tenant guarantor. Do not borrow more than you will be able to repay when the time comes.
Will I be able to commit to the loan term?
Commitment and discipline are essential for long-term loans. You may make smaller payments on a long-term loan, but the interest rate is higher. Choose a loan term that fits your current and future financial circumstances.
What happens if I miss a repayment?
If you miss a payment, you could lose 150 points off your credit score. The loan’s default will result in 350 credit points and a County Court Judgment (CCJ). CCJs stay on your credit file for six years, making it more difficult to secure credit in the future.
Do I need a contingency plan?
It is imperative to have a contingency plan to ensure timely payments. You should consider your options carefully before taking out a tenant guarantor loan.
Each lender has a different process for making a decision. Documentation begins after the lender approves your loan. Once all the formalities are complete, your lender will deposit the funds in your account. After you receive the funds, you can use them at your discretion, albeit responsibly.
If you or the guarantor don’t settle the debt, it may not be possible for you to get out of your guarantor agreement. You can terminate your guarantor agreement if:
Paying the dues would be the simplest way to end the guarantor agreement. As soon as both parties fulfil their obligations, the contract will be null and void.
You can borrow up to £35,000 for 12-84 months with LoanTube.
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The rate you are offered will depend on your individual circumstances.
Representative APR Example: On an assumed loan amount of £2,600.00 over 36 months. Rate of interest 41% per annum (fixed). Representative 49.7% APR. Total amount payable £4,557.89 of which £1,957.89 is interest. 35 monthly repayments of £126.61 and a final payment of £126.54
Warning: Late repayment can cause you serious money problems. For more information, go to MONEYADVICESERVICE.ORG.UK
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Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on any debt secured against it.