It’s still possible to get a loan without a guarantor, even if you’ve got bad credit. It may cost you more, but for a path previously off-limits to this large cohort, the gate is now open
What is a guarantor?
If you can’t get approved for a loan, usually if you have a bad credit rating, then you can nominate a guarantor. That person will make loan repayments on your behalf if you default; as such, they usually have to have a pretty strong credit rating.
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What is a no guarantor loan?
In a nutshell, no guarantor loans are short-term loans available to people with bad credit, and who also can’t find someone to guarantee the loan. Having a guarantor brings the risk down for the lender, so with no guarantor loans you’ll tend to find higher rates of APR. That being said, deals are far more competitive than they once were, so make sure you run a loan comparison in advance if you’re exploring this route.
While technically any loan without a guarantor could be classified as such, the phrase is generally understood to refer to loans specifically for those with bad credit.
What are the advantages of a loan without a guarantor?
If you take out a guarantor loan, then that person must pay any debts you have if you’re unable to. That’s a lot of pressure on someone – which is why usually guarantors are close friends or relatives – because if they miss your payment, it’ll impact their credit score too.
Finances are often a sensitive matter, and asking someone to be a guarantor may simply be neither preferable nor possible for many. A loan without a guarantor means your borrowing doesn’t impact anyone else.
As the application only involves one person, the process is usually simpler, too.
What are the disadvantages of loans without a guarantor?
Because these loans are specifically marketed at those with poor credit histories, interest rates tend to be pretty steep. This means your loan could end up costing you considerably more than the amount you borrowed.
While there are an increasing number of specialised bad credit lenders offering no guarantor loans, rates will never be as competitive as for those with good credit histories, nor if you were to have a guarantor as a safety net. Weigh up what it’ll cost you, factoring in the additional paperwork and checks you’ll need to pass in order to be approved.
How much can I borrow with no guarantor?
With bad credit and no guarantor, you may find you can’t borrow as much as you’d like to. Or, if you can, you’ll have to pay considerably higher interest rates than those advertised. So, our best advice is if you’re looking for a no guarantor loan, only borrow as much as you absolutely need to.
If it’s a personal loan without a guarantor, you could borrow up to £25,000. If you secure your loan against an asset, you could get more. Loan sums will vary considerably between lenders, especially for people with bad credit.
Alternatives to no guarantor loans
There are other ways to borrow than just taking out a loan without a guarantor.
- Peer-to-peer loans match individual lenders with applicants. As they’re not companies, you tend to get better rates of interest as well as more options.
- Overdrafts are a good choice if you only want to borrow a small amount – up to £1,000 – and want flexibility of repayments. You can apply through your bank.
- Bad credit lenders specifically loan to people with bad credit. But rather than focusing solely on your credit score, lenders will also take into account your income, employment status and spending habits. So, if you’re in the process of building up your credit score with consistent income, this could be a fruitful avenue to explore.
Before you apply
Like any form of borrowing, loans come with a risk. With a bad credit score and no guarantor, that risk is heightened for the lender and ultimately reflected in the price you pay. So before you apply, check:
- Do you really need the loan?
- How much do you need to borrow?
- Can you afford the repayments with no guarantor?
And, as always, check the terms and conditions before applying to give yourself the best chance of being accepted.