For many borrowers, finding a loan provider who will give you a good deal on a short-term loan with bad credit and no guarantor can be difficult. If you’re unsure about what any of this means, don’t worry – the LoanBroker team are here to help.
In this article, we will explain what bad credit is, what a guarantor is, and how you can get a loan with no guarantor and a low credit score.
What does it mean to have bad credit?
Bad credit means that you have a low credit score. A credit score is one of the measurements that loan providers use to help them decide whether they are going to approve your loan application. It’s based around how many loans you have taken out in the past, how many of your repayments were made on time, and how much credit you’re currently using out of the amount that’s available to you, among other factors.
“Bad credit” normally means that you have missed loan payments, defaulted on previous loans or credit cards, or you have applied for multiple loans in a short space of time. Bad credit limits the number of loans that you can apply for however there are still options available to you if you’re worried about your credit rating.
What is a bad credit loan?
A bad credit loan is a short-term loan that is specifically designed for people with bad credit scores. Usually, when loan brokers are looking at your credit score, they will need it to be a certain number but with bad credit loans, their criteria for who can be accepted is much open-minded. Bad credit loan providers are often more interested in the person you are today rather than any difficulties you might have got into a few years ago.
This does mean that the interest rate you pay on your loan will be slightly higher but it also means that you will have access to the finance that you need.
What is a guarantor?
Some short-term loans and bad credit loans need you to have someone called a guarantor. These are people who will pay off your loan if you cannot repay it yourself.
For many borrowers, finding a guarantor can be difficult or you simply might not want to have one. Asking someone to take responsibility for paying your loan back is a big thing to ask. If your guarantor is forced to pay your loan back, it could permanently damage your relationship with them.
If you don’t want a guarantor. this isn’t a problem because there are still plenty of short-term loan providers out there who offer bad credit loans to people on their own merits.
Why do most bad credit loans involve guarantors?
Bad credit loans don’t require something called “security”, sometimes called “collateral”. This is something of value that you will be forced to hand over to your loan provider if you can’t pay off your loan. Banks and other large loan companies use security to make sure that they aren’t going to make a loss on the loans that they give people if they run into financial trouble.
Personal loans don’t need security – rather, what they do is use both the information you fill in on your application form and your credit scoreto make a decision.
But if you have a bad credit score, it tells many loan providers that it is unlikely that you will be able to pay off your loans based on your financial history. This is why many lenders like a guarantor – it provides them with peace of mind if you can’t repay their loan.
Are there any downsides to guarantor loans?
No-guarantor loans are much better for building your credit score back up than guarantor loans are. This is because you are showing loan companies that you can take out and pay off a loan without anyone else’s assistance.
Additionally, finding a guarantor can be very difficult. If you set your sights on getting a guarantor loan, you still need to consider who your guarantor will be. Being somebody’s guarantor is a large commitment, so naturally it is quite difficult to find somebody willing to do that for you.
Each lender has their own unique criteria for who can and cannot be a guarantor so, even if you find somebody who is willing, they may not meet the lender’s eligibility requirements..
Compare no-guarantor loans with LoanBroker
If you’re looking for a no guarantor loan with bad credit, use LoanBroker. We are a loan broker, not a direct lender. This means that we negotiate directly on your behalf with the lenders themselves.
To start your application, all you need to do is fill out one form. In this form, you tell us how much you would like to borrow, how long you would like to borrow the money for, how much you earn a month, what you do for a living, what you spend your money on each month, and a few other questions.
We then send your application off to our network of direct lenders. They review your application and decide whether they would like to offer you a deal. We compare all of the deals that come back to us and show you the best one. This entire process can be completed in a matter of minutes.
This process is quick, free, and is perfect for anyone with bad credit looking for a no-guarantor loan.
The result of this system is that you find a loan that suits you, with the best terms and interest rates available. To get started with filling out your application, click here.