No guarantor loans are small personal loans aimed at funding small emergencies such as a car repair and an unexpected medical bill. Qualifying for no guarantor loans is not a cinch. You must have a decent credit report to be able to secure a good deal. Here are the features of these loans:
- Loans without a guarantor are small loans, with a maximum repayment length of up to 14 days.
- They are discharged in one fell swoop.
- Falling behind on the payment will wreak havoc on your credit score.
- On-time debt settlement cannot help build your credit score.
- Bad credit borrowers can submit their application, but an extremely poor credit rating and a lack of affordability always result in rejection.
Reasons why you fail to qualify for non-guarantor loans
No lender would ever reveal the criteria they employ to calculate their affordability, but the most common grounds on which an application is refused are as follows:
- Your credit history is disapproving given the standards at which lenders accept applications.
- You already owe too much debt, so taking on a new obligation raises concerns about your repayment potential.
- Your credit score is lower than the bare minimum rating lenders use as approval criteria, despite you having a good source of income.
- You credit card bills are too high.
What are the alternatives to non-guarantor loans?
Here are the alternatives to loans without a guarantor:
Credit union loans
Upon being rejected by direct lenders, credit unions could be your best bet. Their loan deals are more favourable than those of direct lenders, but they do not guarantee approval either. The criteria that credit unions might differ from direct lenders, but an affordability check is a must. If your current financial condition is weak, they will likely refuse you.
- They charge lower interest rates as compared to direct lenders.
- The repayment terms are flexible. Your overall financial condition will decide the size of the monthly instalments.
- There is a possibility of getting these loans despite a poor credit rating.
- You must be a member of a credit union.
In case of an extremely poor credit history, your chances of qualifying for a loan from a credit union are slim.
Peer-to-peer lending
A small amount of money can be borrowed from online platforms where a couple of individuals pool their money together to provide financial assistance to the needy. While these platforms seem to be quite affordable, they are not always. Subprime borrowers always get the short end of the stick because of their credibility being called into question. The good thing is that they are regulated by the FCA and hence deals are vested in the interest of borrowers.
- Repayment terms will be offered based on your financial condition. Flexibility is what makes them appealing.
- They could be more lenient toward your poor credit history.
- Interest rates will be high for a less-than-perfect credit report.
- Platforms charge fees.
Although such peer-to-peer platforms are popular, it is enjoined that you compare deals before borrowing money.
Apply with a co-applicant
Although direct lenders accept all kinds of applications, the approval rate for very bad credit loans with no guarantor from a direct lender is very low. Lenders always feel reluctant to approve a loan for a borrower whose past payment record is shady. Here comes the role of a co-applicant.
A co-applicant is a co-signer. The difference between a co-applicant and a guarantor is that the former applies for the loan jointly with you. Hence, they are accountable for debt settlement in part and in full.
The co-signer must have a good credit rating and strong income sources in case you fail to settle your debt this time, too.
- The presence of a co-signer reduces the risk to the lender, which ameliorates your chances of being approved.
- Your co-applicant will be responsible for the full settlement of the debt in case you refuse, and yet they will lose their credit score.
Understanding the upsides and downsides of these loans is a must before making a decision.
Borrowing from friends and family
It may feel uncomfortable, but they will not cost as much as other alternatives. Having a practical repayment solution will ease both parties. Ensure that your parents will not struggle to meet their essentials while going to bat for you.
- Borrowing from such informal sources involves no credit checks.
- They are normally interest-free. However, you should try to pay some.
- Relationships could be strained if you fail to keep your promise.
You should treat this platform like a formal loan. A written agreement ensures reliability and commitment.
Assistance from your employer
Your employer could offer you a salary advance if you have been working for them for a long period of time. Some employers run other assistance programmes to help their employees. Talk to the HR department if they have any provisions.
- You will be able to access quick funds.
- No credit checks are performed.
- The advance cannot be more than your monthly salary, and sometimes it is not equal to that, too, depending on your wages and the company’s policy.
This option might not be practically suitable as an advance sum will be deducted from your next month’s salary, leaving you with little funds then. It is likely that you continue to struggle in that month too.
To wrap up
Loans with no guarantor are not easily accessible when your credit file is not impressive. Fortunately, there are some alternatives, such as credit unions, applying with a co-signer, and borrowing from friends and family.
Whatever option you choose, assess both pros and cons before making a decision. All types of loans are expensive, and failing to pay them off can severely damage your credibility and future chances of getting lower interest rates.
