Getting a Loan Without a Guarantor
- 11th July 2018
- Posted by: Loanable
- Category: Resources
In applying for and getting approved for a loan, we know that the bank or lender reviewing our loan application is going to do a credit check. They will look at our credit history and credit scores, and use this as a basis to approve or reject our loan.
In some instances, even if someone has bad, poor, or no credit, a lender may ask the borrower to have a guarantor. Someone to sign the application with the borrower, and being responsible for the payments should the borrower default on the loan.
Many bank loans will require a guarantor to reduce their risk on the loan. However, not everyone can get a guarantor, or may want to ask someone to be a guarantor.
So how does someone get a loan without a guarantor, are there loans available to borrowers with bad credit or low credit scores, with out the lender asking for a guarantor?
Loans That Do Not Require a Guarantor
There are some types of loans, that do not need a guarantor, even for someone with bad or no credit.
Payday loans do not require a guarantor, they only require that the borrower has a job, a bank account, and can afford to repay the loan.
These are very short-term personal loans, usually 30 days or less, and carry high interest rates.
Logbook loans also do not require guarantors. The loan is granted based on the borrower having a car of value, and that they can afford to repay the loan.
Some secure loans, such as a mortgage to buy a property, or a car loan, may not require a guarantor depending on the borrower’s deposit, and also affordability. This does not mean that for all secure loans a bank or lender may not ask for a guarantor.
Ways to Increase Your Chances of Not Needing a Guarantor
There are a few ways a borrower can increase their chances of getting approved for a loan, and not being asked to provide a guarantor.
* Affordability: Showing a lender that you can afford to repay a loan is critical in getting approved on your own for a loan. Also, not just that you can afford the payments, but also showing a pattern of savings. If you have a savings account that you have been regularly paying into, aids in showing affordability.
Doing an income and expenditure sheet prior to applying for a loan helps as well.
* Deposit: The larger the deposit you have for car loans, or mortgages, the less likely a lender will request you get a guarantor.
* Increase your credit score: If you have bad credit or a low credit score, look to improve it.
Check your credit history for any errors or omissions, get on the electoral role, see if your landlord will join the Rental Exchange. All of these can improve your credit.
* Loan terms: In some instances by requesting a lower loan amount, or reducing the number of months to repay the loan, and paying a higher interest rate, can be ways to eliminate the need for a guarantor on a loan.