If you’ve been applying for credit through direct lenders, you may have noticed that some loan providers refuse to approve an application unless you have a guarantor.
This is often the case for would-be borrowers with bad credit. Lenders will ask for someone you know with a good credit rating to guarantee that they will repay the loan if you are unable to. This reduces the risk for the lender, which means you’re much more likely to be accepted for credit.
However, not everyone is able to provide a guarantor. Thankfully, there is a wide range of lenders across the UK, who specialise in providing tailored loans to those with less than perfect ratings who are unable to find a guarantor.
Not only is there a strong chance that you’ll be accepted for your loan with some lenders but successfully paying back a loan which does not require a guarantor helps you re-build up your credit rating for the future.
In this article, LoanTube team looks at what no guarantor loans actually are, who they’re designed for, and how LoanTube works with borrowers like you to match you to a lender with the cheapest interest rate available.
What is a Guarantor?
A guarantor is someone who agrees to make the rest of the repayments on your loan if you are unable to.
Your chosen guarantor enters into a contract with your lender agreeing to take responsibility for settling your loan instead of you. They need to undergo both an affordability assessment and credit check for the lender to feel happy that they would be able to afford the monthly payments if it was left to them.
Your guarantor must:
- be between the ages of 18 and 75
- have a good credit history
- in many cases, also be a homeowner
Different lenders have different criteria for the type of person they feel happy as a guarantor on a loan. They don’t generally share this criteria on their website and this can make it difficult to find a suitable person to support your application.
What is a No Guarantor Loan?
As the name suggests, a no guarantor loan is a loan, which does not require a third party to agree to repay the remainder of your loan if you’re not able to.
Often, borrowers find it difficult to ask a family member or friend to be their guarantor. If you default on a number of repayments and the lender does not think you’ll be able to pay your loan back, they turn to your guarantor to get their money back.
Your loan then becomes your guarantor’s debt. For this reason, it can be hard to find someone willing to put their own credit score on the line to help you persuade a lender to say “yes” to you on a loan.
No guarantor loans are a lot riskier to your lender.. That means that the interest rates you’ll be offered tend to be slightly higher.
No Guarantor Loans are Best Suited to?
No guarantor loans are very popular among borrowers – millions of them are taken out every year in the UK. The application process takes less time because lenders only need to complete one credit search on you rather than both you and your guarantor.
This makes getting a “yes” or “no” on your loan application quick and simple. That makes them ideal for covering emergency expenses like car repairs and boiler breakdowns when you need the money in a hurry.
You may be worried if you have a poor credit score it suggests that you may have difficulty in repaying a loan. Some lenders do worry about it and that’s why they ask for a guarantor – it allows them to offset the risk to them if a borrower does default.
Most lenders don’t worry about it if you don’t have a guarantor. No guarantor loans, sometimes called personal loans, are a type of loan tailored to you, which do not require any guarantor or collateral (like your home or your car) in order for you to be accepted. The exact criteria to be approved for a no guarantor loan vary from lender to lender.
How do Loans with No Guarantor Help you Build Credit?
One of the most popular reasons borrowers opt for guarantor loans rather than personal loans is because they believe that their own credit score is not high enough for them to be accepted for credit if theirs is the only name on the application.
Guarantor loans offer an opportunity for you to be accepted for finance when you otherwise might not have been. Obtaining one and paying it off on time and in full gives you the opportunity to build up credit in your own name to boost your credit score.
If you do not have anyone willing or able to act as your guarantor, then a no guarantor loan offers you the same opportunity to get access to the money you need and to rebuild your credit score.
Can I Find Cheap Loans with Bad Credit and No Guarantor?
Yes. In the eyes of some loan providers, lending to those with no guarantor and a history of bad credit comes with a slighter higher risk.
While some no guarantor loan may have a slightly higher interest rate than loans which need a guarantor, a no guarantor loan offers you the opportunity to access the money you need even if your credit history isn’t perfect.
What you Need to Know About Applying for A No Guarantor Loan Through LoanTube
At LoanTube, we work to help people find the cheapest no guarantor loan possible, even for borrowers with poor credit ratings.
How do we do this? Every no guarantor lender we work with has a “profile” – the type of borrower they’re ready to lend to. When you submit your details to us, our clever computer system compares real-time offers made directly by the lenders. This is all done in real-time and, once we have all the quotes, we will display the offers with their terms and conditions to you, as the same will help you take an informed decision.
For your peace of mind, we’re authorised by and registered with the Financial Conduct Authority as are all the lenders we work with.
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