- Find no guarantor loans for amounts from £100 to £5,000
- Applicants with a poor credit history considered
- At affordable interest rates with flexible repayment terms
Understanding No Guarantor Loans
No guarantor loans are personal loans. The borrower does not need a guarantor, a third party who agrees to repay the loan if the borrower defaults.
These loans are for those without access to traditional options. They may lack collateral or a credit history. They have a simple application process, however, loans are riskier for lenders, so they can have higher interest rates to compensate for the risk.
Benefits of No Guarantor Loans
Guarantors offer security to lenders, so loans tend to get faster approvals at lower rates. Without a guarantor, loans are harder to get approved. Applications need to be directed to specialist lenders.
Subprime lenders are firms that provide financial flexibility to those with a poor credit history, often without requiring security.
The familiarity specialist lenders have with customers finances that don’t meet the norm makes them ideal for those with limited assets or seeking a simple loan. It’s also worth noting that no-guarantor loans reduce stress on personal relationships because only the main applicant is responsible for the loan repayments.
Who Can Apply for No Guarantor Loans?
- People with a steady income
- Those with a poor credit history
- People without significant debt
- Employed or self-employed borrowers
How No Guarantor Loans Work
No guarantor loans are the same as unsecured personal loans. There’s no security for the lender. With a guarantor loan, someone else agrees to repay the debt if the borrower defaults. This lack of security on the lenders’ side pushes interest rates up. Repayments are by instalment, at fixed monthly amounts, so you always know how much you need to pay and when.
The Application Process for No Guarantor Loans
Step 1. Applying:
You should target loan applications to suitable lenders. Not all provide no-guarantor loans, and those that do, don’t always cater to applicants with bad credit, but subprime lenders do.
Applying online will get you a faster decision. The lender may require evidence to support your application during the application process. Have your supporting documents ready to upload. A digital copy of your photo ID, proof of address, and a recent bank statement.
Step 2. Review:
The company you apply to reviews your application. They’ll check if you can afford the loan and verify that you meet the lending criteria.
Step 3: Approval:
If approved, you should review the loan offer. Check for the interest rate, late fees, and any loan origination or processing fees. Agree to the terms of the loan offer.
Step 4. Disbursement
You receive the funds direct to your bank.
Funds are transferred to your nominated bank account. In the case of guarantor loans, funds may be paid to the guarantors’ bank. (Some lenders do that to ensure they know how much the loan amount is).
Step 5. Repayment:
Make regular payments as per agreed terms. Missing payments or defaulting on the loan may incur late payment fees. It can also damage your credit score.
Repayment Terms for No Guarantor Loans
Before agreeing to accept a loan offer, check the repayment terms for these. Pay particular attention to the points listed below:
Loan Duration: The total number of months or years you must repay monthly. Check it’s correct.
Interest Rates: The percentage charged is represented as APR. It stands for annual percentage rate. Yet, the interest can accrue daily.
Monthly Repayments: No guarantor loans are usually fixed-fee loans. A benefit to no guarantor loans is the fixed fees. Your loan agreement will show the total due each month. This will be inclusive of the money borrowed, plus interest at the applicable rate.
Early Repayment Fees: Some types of loans may incur early repayment charges (ERCs) if you repay in full to exit the agreement early.
If there are ERCs, you may be able to ask the lender for an early settlement figure to reduce the final payment. This is because the total cost of the loan is based on the interest accruing for the entirety of the loan term. If it’s repaid early, interest fees are less.
Late Fees: Missing payments can incur a late payment fee. These become due on your next payment due date. Check that you know how much will be taken from your bank to avoid a repeat of the same.
Risks of No Guarantor Loans
No guarantor loans are not without risk. The biggest risk is the potential for debts to spiral.
As no guarantor loans have higher interest rates, monthly repayments are higher. Should your circumstances change during the loan term, keeping up repayments could become problematic.
On the one hand, paying late incurs late payment fees. On the other, paying can leave you short of cash for essentials. Then payday loans could be considered, and next thing, you’re cycling debts—Borrowing from one company to repay the other.
Budgeting tips to reduce risk
No guarantor loans suit those with a fair to good credit score. Until you improve your score, consider better budgeting to get decent interest rates. Budgeting better in the short term can help you pay more to settle the loan early. You can use an online budget planner to help with this.
Alternatives to No Guarantor Loans
If you’re unable to get a friend or relative to be a guarantor or don’t feel comfortable asking, there are other options.
- Consider Credit Unions
Credit Unions are local and provide loans to members. They’re community co-operatives. Usually, loans are secured against savings.
- Salary Advance Schemes
Many employers run salary advance schemes. Some are in-house, others are partnered with finance companies. Speak with your manager at work to see if there’s a scheme in place.
- Local council welfare funds
Numerous councils run local welfare funds. To learn more about this, see the Local Welfare Fund page at Entitledto.co.uk.