Who should actually consider a no-guarantor loan?

With multiple short-term loan options to choose from, individuals randomly pick one. However, that’s not right. Each loan serves a purpose and shares different eligibilities. For example, a payday loan helps you close the emergency tied up before the salary day. Similarly, a no-guarantor loan is not for everyone. Although payday loans also don’t require a guarantor, they do not work the same way.  To know the best use of a guarantor loan let’s first begin with the basics.

Who is a guarantor on a loan?

A guarantor is a close associate of the borrower. He acts as a security on the loan if the borrower fails to pay. A lender may demand one if the borrower’s financial capacity fails to reveal repayment potential. Here, the guarantor’s credit and income potential strengthen the application. The loan provider may also ask for one in case of poor credit or low income. The guarantor is responsible for paying the dues if the borrower cannot. 

However, finding a guarantor or convincing someone to be the one is tricky. No one wants to risk their finances to help the other person unless it is a family member or close friend. It is the reason individuals seek instant cash facilities that do not mandate one. Most of these seekers are individuals with poor credit history.

What does a no-guarantor loan imply?

A no – guarantor loan is a financial facility that does not require a guarantor for approval. Individual borrowers may qualify for this unsecured loan facility with a strong credit score. Additionally, the borrower must reveal strong repayment proof like- salary slips, part-time payment notifications, or income from rent to get the loan. 

The interest rates on these loans stay competitive than those with a guarantor. This is because the lenders share more risk here. You may get up to £10000 for emergencies without a guarantor.

Can someone with a poor credit score get a loan with no guarantor?

Although lenders prioritise having a Steller credit history to get the loan, you may qualify.   In these circumstances, lenders calculate the affordability by undertaking various other parameters. He may evaluate your loan affordability on factors like:

• Employment History
• Income
• Consistency in employment history
• Recent financial management- bill payments, credit card payments, etc.
• Rental payments
• Joint accounts with persons having poor credit
• Monthly liabilities and savings

These are some primary factors that lenders consider before providing loans without a guarantor for bad credit scores. Before applying, pay the pending bills and avoid any hefty expenses. It may also help you get affordable interest rates despite poor credit.

Is a no-guarantor loan the right deal for me?

A no-guarantor loan is ideal for you if you cannot find a person to secure the payments. It is generally for tenants and students living abroad away from their known ones.  In this case, the guarantor requirement proves to be the greatest obstacle to their needs.

Apart from a guarantor, you must consider other things before applying for the loan. There is so much to research regarding affordability, usage and the need before getting the agreement.

So, whether you should get loans without a guarantor or not depends on the factors below:

1)  Can you keep up with repayments?

Getting a loan with no guarantor and defaulting can ruin your credit score. Thus, analyse your potential to carry the loan payments consistently. If your finances allow, you may apply. Alternatively, defaulting or missing payments on the loan may impact your credit score, budget and other financial goals.

Additionally, repayments have a lot to do with the income stream and nature. Individuals with seasonal earnings may find it hard to qualify. Alternatively, individuals with regular income must have the potential to budget for the repayments. If you can meet the conditions, explore further.

Precisely ensure sufficient flexibility in your monthly expenses, savings and repayments.

You can automate the repayments to ensure regularity. It also helps avoid late payment penalties.

2)  Are you aware of the terms?

Usually, every loan has different terms and conditions that a borrower must comply with. You can see them in small print on the loan agreement. Always go through these terms before acceptance. It helps you understand the process, loan functioning and associated costs.

Also, you can spot and discuss some unknown costs mentioned in the agreement before approval. Alternatively, you may face consequences like CCJ for non-repayment after a specific date.

3)  Is this loan necessary?

It is the most important question that you should ask yourself before applying for any loan. Analyse the amount you need and the purpose. Question yourself:

• Can you wait until salary to accomplish the task?
• Have you explored all the possible options?
• Is this the best rate for your needs?
• Can you bridge the needs with savings?
• Can you seek help from your roommate or neighbour for minimal cash?

4)  Does the loan meet your amount needs?

Sometimes, your requirement exceeds what you actually can qualify for. For example- you need £10000, but according to the lender, you can only get £7000 for your needs. What would you do here? You can consider 3 options here:

• Either re-analyze your needs and borrow what you qualify for
• Borrow a lower amount than what you qualify for
• Check bad credit loan options and provide a guarantor

Choose the options that suit your finances, needs and personal interests better. If confused, consult the lender for personalised assistance. Money providers and experts at the 1one Finance platform help customers with personalised financial help with borrowing the right amount. It may help you prevent financial and personal interest alongside meeting the goals.

5)  How long do you need the money for?

A no-guarantor loan shares the maximum term limit of 12 months. It means you cannot apply for the term beyond that. However, you can choose to repay the loan within 3, 6, or 8 months too. Choosing the right repayment term depends on:

• Monthly income and liabilities
• The amount you can budget for as repayments
• Amount borrowed
• Interest costs
• Penalties
• Current financial situation

Considering these factors will help you choose the right term. However, prefer to pay at the earliest as longer repayment terms have high interest costs and liabilities.

Bottom line

Thus, if you struggle to get a guarantor and share the best potential to pay the dues timely, get the no guarantor loan. It may help you counter needs without third-party interference. Moreover, it safeguards your financial secrets and saves relationships. However, meet the repayments timely to avoid default.