Some individuals find discussing critical financial matters challenging with anyone. It could be – complications in credit building, settling a previous debt or bankruptcy. It is the reason individuals prefer to manage every financial matter alone. It grants them complete power over finances and improves it. Think of it like this-
What will you do if you need urgent cash for car repair? Will you bother your roommates or buddies? Instead, you will seek the best ways to solve it yourself.
Individuals mostly use their savings to finance their needs. However, what if you live from paycheck to paycheck? It makes it impossible to save much. This is where no guarantor loans help.
These loans help you counter the instant requirement but are not without risks. Let’s first understand the concept.
What does a guarantor do?
A guarantor is a close family member who agrees to take the responsibility to pay the dues. It is if the borrower fails to do so. A guarantor pays the full or the part dues according to the borrower’s affordability. Additionally, a loan with a guarantor is more affordable. The guarantor on a loan helps you reduce monthly payments.
What are no guarantor loans?
No-guarantor loans are financial facilities for borrowers seeking instant cash without a third person/guarantor despite a fair credit history. They imply that the borrower is solely responsible for paying the dues. Non-repayment may lead to default and CCJs.
It is a fixed but competitively priced loan for short purposes. These have competitive interest rates because lenders consider the borrowers lacking stellar credit scores risky. Thus, defaulting may impact the credit score.
Who are ideal candidates for loans without a guarantor?
Each loan has a specific purpose and audience. You may benefit from the no guarantor loan if:
1) You have a stable income
Income is the primary parameter, apart from credit score, that qualifies. Individuals with regular and consistent income get instant approval. It is not ideal for unemployed individuals with part-time income.
2) Individuals with fair to good credit history
Individuals with bad credit scores cannot get a no-guarantor loan. However, individuals with fair (721-880) and good credit scores (881-960) may qualify quickly. This is because the profile reveals the potential to pay the dues on time.
3) Can make regular payments
These loans share competitive interest rates. This is due to the ease of approval and lack of collateral requirements. Individuals comfortable with meeting regular payments at high interest rates may apply. You may use them if you are confident about making regular payments without skipping.
Thus, you may seek no guarantor loans from direct lenders if you can afford the monthly payments. Compare the options to fetch the lowest interest rates available. It will help you avoid unnecessary interest rates and other costs.
Sure-fire ways to avoid risks regarding no guarantor loans
Some potential risks associated with no guarantor loans are:
- High interest and extra loan costs increase the total amount. It becomes difficult to pay.
- Non-repayment or missed payments may impact credit scores
- Overstretching agreement leads to an endless debt cycle
- Facing instant rejection on applying with a bad credit score
Let’s analyse the best ways to tackle these risks associated with loans with no guarantor:
1. Compare and apply for an affordable loan
One of the best ways to avoid high interest costs and terms is by comparing your options. Check and compare loan parameters like APR, interest rates, monthly payments, loan costs—loan establishment fee, closure fee, and administrative costs. Moreover, analyse additional costs you are likely to pay, like missed payment fees/penalties or prepayment costs (if any). It will help you avoid unnecessary payments.
Also, check the best ways to reduce loan costs. It could be like paying bills, settling existing credit card debts or consolidating debts. Such efforts may help you get an affordable loan with easy-to-budget-for payments.
2. Set a Budget for monthly repayments
No guarantor loans sharing competitive interest rates require budget pre-planning. After getting the agreement approval, analyse the payments. Check the best ways to save for repayments from the existing income. You may need to re-adjust some recurring liabilities, such as rent, groceries, school fees, car maintenance, transport expenses, utility bills, etc.
For example, if you earn £20000 and spend £16000 on primary liabilities, analyse the best usage of £4000. If your monthly no-guarantor loan payment is £450, check how to save that. It is because emergency expenses or urgencies amounting to £3000 or more may impact your loan payments. Thus, set a flexible budget. For example- instead of saving the exact £450 amount, save £500. It will help you ensure regular payments do not impact the necessities.
3. Set a Budget for monthly repayments
Individuals often choose the wrong repayment schedule to pay the dues. For example, choosing a repayment of 6 months when you can comfortably pay within 11 months is wrong. It may impact basic lifestyle necessities and budget. Eventually, individuals may struggle to meet the dues, leading to a debt cycle. It affects other lifestyle goals and credit scores.
Thus, analyse your situation and re-schedule your payments quickly. It is helpful if your financial situation changes. If your income drops, you cannot carry payments. Thus, identify the best solutions to pay regularly.
For example- you may consider joint loans for a bad credit score if you lose your job or your income drops. Paying the dues with a joint agreement helps you repay it quickly. However, the person must have a regular income ( sufficient to pay the dues) and a better credit score to qualify. It is one of the best ways to split the financial burden and avoid default. Additionally, the second person on the agreement having disciplined finances helps you get affordable interest rates.
4. Improve credit history before applying
Most individuals face instant rejection on no-guarantor loans when applying with bad credit. It impacts their credit score further. Thus, always check other ways to counter your instant cash issues. Choose the one that impacts your credit score the least or not at all. For example- no credit check loans may help you with instant cash without impacting your credit score.
Additionally, check your loan approval through an eligibility checker before applying. It will help you understand the expected loan costs. It will prevent you from making multiple loan applications in an emergency.
Bottom line
No guarantor loans are ideal for individuals with consistent income and fair credit scores. It helps one get instant cash up to £10000 without a third-person requirement. It is the best way to counter instant financial requirements without bothering anyone. However, take essential steps to avoid the risks associated. The above blog tips may help you with that.
Jessica William operates as a Senior Consultant and Chief Content Editor for 10 years at 1Onefinance. She assists the firm in getting a grip on the new lending laws and regulations. She does so by researching the trends, consumer requirements, and new audience preferences. Jessica is responsible for making important financial and administrative decisions.
Apart from helping consumers with the best solutions, Jessica Williams helps them ensure financial stability. She analyse the business data, finances, expenses, and revenue/ income of customers and determines necessary changes. Jessica finished her Doctorate in finance and law and implements her knowledge to the best interest of the firm and customers.
