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Last updated: 28 October 2022
When you’re looking to borrow money, you’ll come across homeowner loans. These allow property owners to borrow large sums, using their asset as security.
But what does that mean for the growing number of renters? The good news is there are loans for tenants available too. ou
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What is a tenant loan?
Also called non-homeowner loans, these are personal loans available to tenants and those who don’t own property. You don’t have to put up any form of collateral, so it’s less risky for you. However, you’ll find you can’t borrow as much as with secured loans.
Moreover, borrowing money with a tenant loan carries the same risk as any other loan. If you can’t keep up with your repayments, or default, you can quickly fall into debt and your credit score will be damaged.
Loans for tenants are available for the self-employed too, but you’ll need to prove your income by supplying a year’s worth of audited accounts.
What are the best loans for tenants?
There isn’t a single best loan for tenants – that’ll depend on your personal requirements. But we can give you some pointers in how to sniff out a good deal…
As a general rule of thumb, don’t borrow more than you need to. That being said, some lenders tier their products: they’ll offer a rate of interest to loan sums within a range. That means that you could find increasing your loan sum by a small amount brings it into a lower interest rate, so look at the total repayable figure and see if this is economically efficient.
Look carefully at loan terms as well – the longer they are, the more affordable your monthly repayments will be, although you’ll pay back more overall.
Finally, you should register on the electoral roll to increase your chances of being accepted for a non-homeowner loan.
Can I get a tenant loan with bad credit?
If you’ve got bad credit then you can still get non-homeowner loans. However, be prepared to pay an increased rate of interest due to you being deemed high risk. In that case, you should narrow your search to bad credit lenders as they’ll offer you a rate that takes into consideration your personal circumstances, like your income and employment status.
You could also explore other ways to borrow money too, such as overdrafts or peer-to-peer loans. If you can improve your credit rating by making timely repayments on smaller amounts, then you could get a better deal later on.
What is the Rental Exchange?
Experian, one of the three main Credit Reference Agencies (CRAs), recently introduced a feature to help tenants build up their credit report – which is hard to do if you’ve never borrowed money.
With the Rental Exchange, you can sign up to have your rental contributions tracked as proof of making timely payments, which can help to build up your score. Consequently, in the future you may be able to tap into more competitive deals with a stronger credit score.
You can register with the Rental Exchange online.
Can I get a non-homeowner loan if I rent a council house?
Some lenders will allow tenants of council properties or housing associations to take out a loan, but there isn’t a definitive list of those that do. The best thing to do is to compare personal loans using our tool and take a look at your options. Don’t just apply off the cuff – if you can’t see any explicit regulations on non-private tenants then contact the lender directly and ask them.
Any time you put in a loan application it’s recorded on your credit file. If your application is then rejected on the basic principle that the lender doesn’t cover your situation, then that’s a mark on your credit report that could’ve been avoided. So, check a lender’s criteria before you do.