Whether you’re planning a home improvement project, purchasing a car, organizing your wedding or tending to an urgent expense, using up your savings isn’t a wise financial decision. A personal loan can help you finance your projects and purchases. So, you won’t have to exhaust your savings, and you’ll have some time to stock up money to repay the loan. It can help you spread the cost across a certain period, easing the financial burden on your shoulders.
Most people opt for unsecured personal loans, wherein they don’t have to provide collateral security. Personal loans are essentially no guarantor loans. So, as long as you’re applying for a loan with a decent credit score, you may get it without a guarantor.
In this article, we’ll learn more about what no guarantor loans are and how to apply for one.
What is a no guarantor loan?
Most loans are loans without a guarantor. Personal loans, secured loans, home improvement loans, short-term loans, or title loans, per se, won’t usually require you to present a guarantor.
A guarantor is a friend or member of your family who partakes in a loan’s obligations with you. Guarantor loans are ideal for those with a below-average credit profile. Lenders ask for a guarantor to co-sign the loan agreement to reduce the risk of loss. Now, if a borrower defaults, the lender will hold the guarantor accountable for repayments.
However, not all of us can get a guarantor to co-sign our loans. Or, you simply might choose not to add a third person into the equation. You can use a no guarantor loan to bridge your financial gaps. Unsecured personal loans are the most popular form of no guarantor loans. But to get competitive rates and feasible loans terms on no guarantor loans, you’ll need to have a good credit score. If you’ve demonstrated responsible credit behavior in the past, you will most likely get favorable loan offers.
The eligibility criteria for a no guarantor loan can vary from lender to lender. But the offers you get largely depend on your creditworthiness and affordability. If you apply for a no guarantor loan with a poor credit score, you may not find offers with feasible interest rates.
What is the eligibility criteria for a no guarantor loan?
Below are some factors that affect your eligibility for a personal or no guarantor loan. As long as you meet these pre-requisites, your chances of qualifying are high. A lender generally checks the following:
- Credit report / Credit history
- Latest credit score
- Residential history
- Employment history
- Debt-to-income ratio
While applying for a no guarantor loan, provide the lender with accurate information about yourself. If a lender spots an inaccurate or forged detail when they perform a credit check, there may be serious consequences. Lenders always perform credit checks before approving loans, regardless of your credit rating.
If you have defaulted in the past and have a CCJ issued in your name, you might face a hard time securing a no guarantor loan. Multiple credit checks can negatively impact your credit score, irrespective of the lender’s decision. If you self-assess your eligibility before applying, you’ll save your credit score a lot of damage.
How to apply for a no guarantor loan?
No guarantor loans give you the convenience of online application. Here are some steps that you need to follow to successfully apply for a personal or no guarantor loan:
- Decide what you want to borrow: Do some number crunching to find out how much you need and can afford to borrow. It is imperative to keep your affordability in mind because a default could damage your credit score.
- Calculate a suitable loan term: Work out roughly how long you will take to repay the loan and decide on a term accordingly.
- Self-assess your creditworthiness: Scrutinize your credit report to look for errors or discrepancies. If you find any, get them fixed to improve your credit score.
- Identify your loan type: Research the types of loans available in the market. Find out which type of loan suits your needs the best.
- Apply for no guarantor loans: Fill out your details to apply for no guarantor loans.
- Compare loan offers: Gather all your loan offers and choose the best, most feasible option.
6 smart tips to help you apply for a no guarantor loan
Taking out a loan can be tricky for some. Don’t miss these 6 smart tips to apply for a no guarantor loan:
- Steer clear of loan sharks: Loan sharks have loan offers which ‘appear’ to be nice. But they impose sky-high interest rates on their loan offers, so beware.
- Rectify any mistakes in your credit report: Before applying for a no guarantor loan, scrupulously check your credit report for mistakes. If you find some, get them rectified so that your credit score gets a boost. This will help you get better loan terms with lenders.
- Borrow only what you need: Carefully assess your expenses and borrow only what you need, and can afford. Don’t borrow unreasonably just because you can qualify for a higher loan amount on a no guarantor loan.
- Check the cost of your loan: Determine the overall cost of a loan before accepting a loan offer. Ideally, you would choose one with the lowest interest. But it’s important to check which offer comes with the lowest APR.
- Pre-plan your repayments: It is important to have a clear and precise repayment plan in place, before taking out a loan. This will help you align your monthly expenses with the loan repayments so that you don’t miss any.
- Space out your applications: Leave a healthy gap between each application. Each time you apply, a lender will run a credit check on you, harming your credit score. So try to space out your applications across a period of 30-45 days.