You might have been considering applying for a loan and found out that there are numerous different types of loans out there when you did a little research. You might have come across the term guarantor loans and found that in order to take one out you need to talk to someone, usually a close friend or relative, and ask them to stand by your side when applying for a loan. If this does not appeal to you, there are more choices of loans, including no guarantor loans, out there. So which loan might be the most suited to you?
What Are Loans That Don’t Need A Guarantor?
Loans that do not require a guarantor are just as the name suggests. They are loans that:
- You apply for the loan yourself without the need to ask someone to stand behind you;
- These types of loans can be applied for by anyone, including those who have a less than perfect credit rating;
- Your finances remain your own business;
- You do not have to risk friendship or relationships by asking someone if they would be willing to take over the repayments of the loan if you were to find you could not repay it.
Types of loans that do not require you to ask someone to stand as a guarantor include the personal loan, payday loan and short-term loan.
No Guarantor Loans for Those with Poor Credit
There is no question that guarantor loans are one of the easiest types of loan to gain approval for if your credit rating is poor. However, for one reason or another, you might not want to have someone to be a guarantor.
Luckily, there are other options open to you and there are lenders who are more lenient in regards to approval of loans. You might want to consider payday loans, short-term loans or personal loans.
One of the choices of loans for poor credit if you do not want to borrow a huge sum of money is the payday loan. This type of loan is paid back within one to three months, on your paydays, as the title suggests. The payday loan is one of the easiest types of loans to be approved for if your credit rating is bad due to the fact that you are only borrowing a small sum of money and you are paying it back quickly.
When payday loan first arrived on the market, they earned themselves a bad reputation as being expensive ways to borrow. Today the FCA governs them and you can find plenty of information about payday loans on the UK government website.
The payday loan should be considered as a loan to provide a small cash sum to meet financial emergencies. Such as a bill that needs paying before payday or to pay for urgent repairs.
The amount of money borrowed with a payday loan is relatively small, usually in the region of £100 to £500. The loan may be paid off in full on your next payday or spread out for up to three paydays. This makes it a loan over one to three months.
Loans of this nature are generally advertised with what seems to be an extremely high APR, in the thousands. However, bear in mind that the payday loan is not spread out over years, only a month or so. The amount of interest is added onto the loan on a daily basis, so the least amount of time you spread the loan over, the least you will pay in interest.
A short-term loan falls in-between the payday loan and personal loan in regards to the amount of money the loan offers and the term of the loan can be spread over. The short-term loan may be a good choice for anyone who has a less than perfect credit score but not a particularly bad one.
Short-term loans offer between £500 and £1,000 and can be spread out for up to a year. Any longer than this and it would be classified as a personal loan. As the short-term loan is repaid quicker than the personal loan, it may not accumulate as much interest. However, check the APR of any loan you are considering as the higher the APR the more the loan is going to cost in interest.
With short-term loans and personal loans, make sure there is no early repayment fee. The early repayment fee is a fee added onto the loan in the event that you can afford to pay back the loan earlier than anticipated.
For instance, you might take a short-term loan over 6 months and find that you can repay it in 4 months after receiving a sum of money you did not expect. If there is no early repayment fee, you could use that money to pay off the loan early and clear it to save interest. However, if there is an early repayment fee it might do away with any savings you could make if you paid the loan off early.
Personal loans may be harder to be approved for if you have a poor credit rating, as the loans offer up to £5,000 and can be repaid for up to 36 months. This means the lender is taking a bigger risk on you than with the payday or short-term loans.
Fixed or Variable Interest Rate
If considering a personal loan you need to know if the APR on the loan is a fixed rate or a variable rate as this makes a huge difference to the repayments of the loan. A fixed rate of interest is set at the time of taking out the loan, which means you will know up front how much interest the loan is going to accumulate and how much the monthly repayments of the loan will be.
On the other hand, if the APR is variable it means if the Bank of England base rate changes so will the rate of interest you pay on the loan. While the base rate may change in just small increments, over the term of the loan, it can make a big difference as to how much the monthly repayment is. The variable rate of interest is a gamble as the base interest rate could go up or down. If it goes down you would benefit.
With the variable rate, the amount you pay each month could be more or less than what you first started paying.
Secured or Unsecured
Personal loans are generally unsecured loans; however, it is a good idea to check that as some lenders may offer secured loans if your credit rating is very poor. A secured loan gives the lender some protection, as they know they would be able to get their money back even if you cannot make the loan repayments.
A secured loan means you have to put something of value against the loan, which is usually your home. Secured loans are usually offered if many thousands of pounds are borrowed and the loan is spread out over many years. If you cannot make the loan repayments, the lender could start court proceedings to take your property and sell it so they get the money back you owe.
Which Loan is More Suitable For You?
The type of loan more suitable for you would depend on the amount of money you need to borrow, and how long you want to spread the repayments over. To some extent, it would be also dependent on your credit rating and the lender. One lender might not be prepared to offer you a personal loan but might offer you a short-term loan. One lender may see your credit rating as being too big a risk while another might not.
- Consider a payday loan if you only need a small sum of money between £100 and £500 and you can repay it back fast;
- Consider a short-term loan if you need between £500 and £1,000 and you want to repay within a year;
- Consider a personal loan if you need to borrow up to £5,000 and you need to spread the repayments over longer than a year.
Loan Criteria for All Types of Loans
Regardless of which loan you require there are some criteria set out by lenders. For instance, in order to be able to apply for a loan in the UK, you have to be at least 18 years. You also need to have a UK address along with a bank account in your name. You should hold a debit card in your name and the bank account should be able to receive direct debit requests. You also need to have a regular income.
If you meet these criteria, you can start your loan application online by choosing the amount of money you want to borrow and the term of the loan.
Fill in some details, including telling the lender how much you have coming in and going out each month. The lender will use this information to determine if they think the loan is going to be affordable.
We will then search with our panel of lenders to try to match you with a lender. The application takes minutes and if approved money could be paid into the bank on the same day.
No guarantor loans are offered in the form of payday loans, short-term loans or personal loans. The lenders we work with offer affordable loans with competitive rates and numerous loan options, taking your current circumstances into account, along with your credit rating.