If you have bad credit and have been looking for a loan, you might have found lenders want you to take out a guarantor loan. While this type of loan is suitable for many people, it is not suitable for all. So the question that might be on your lips is can I apply for no guarantor loans with a bad credit rating?
Anyone regardless of their credit rating can apply for loans that do not need a guarantor. The difference is how likely you are to be approved for a loan that does not need a guarantor. If you have a good credit rating, you have a wider option for borrowing with lenders willing to offer larger sums of money. With a bad credit rating, the options are limited somewhat but loans are still available without a guarantor.
Why Lenders Offer Guarantor Loans to People with Bad Credit
With the guarantor loan, the lender has peace of mind that if you fail to make the repayments on the loan the guarantor will take over and continue them until the loan is paid off. Therefore, the lender is not taking as big a risk as they would be if they gave you the loan without the guarantor. However, there are different types of loans out there with some being more suited to applying for and getting approval for than others if you have a bad credit rating.
The Types of No Guarantor Loans Available
As mentioned above your credit rating is going to have an impact on the options available to you for loans that do not need a guarantor. We will look at options available for bad credit ratings and for good credit ratings below.
Loan Options for Good Credit Ratings
If you have a good credit rating, you can choose from a wider range of options, which include the following:
- Personal loans;
- Unsecured loans;
- Short-term loans;
- Payday loans.
Most Suitable Loan Options for Bad Credit
If you have a bad credit rating, your options are not as open but lenders generally consider people with bad credit ratings for the following types of loans:
- Short-term loans;
- Payday loans;
- Secured loans.
While the above loan types are the best choices of loans to apply for if you have bad credit that is not to suggest that lenders would not consider you for other loan types. All lenders base lending on different criteria with the lenders we work with taking your credit score and the ability to repay the loan back into account when deciding whether or not to approve the loan.
The Most Suitable Loan Is Going to Depend on How Much Money You Need
Borrowing in the UK has risen year over year with the FCA revealing that in 2018 5.4 million loans have been given out to UK residents. This is a mixture of payday, short-term, guarantor loans and personal loans for people with both good and bad credit ratings.
Regardless of your credit rating, the most suitable loan is going to depend on how much money you want to borrow and when you can repay it.
Bear in mind that with a bad credit rating it is easier to get approval for smaller amounts of money than large sums. It is also easier to get approval for a loan if you can repay it back quickly rather than over the long term.
However, again there are no hard and fast rules with lenders criteria. One lender may turn you down while another lender may offer you the loan.
Loan Options for a Small Cash Sum
Loans offering a smaller cash sum are more likely to be approved than if you ask to borrow a large sum of money if you have a bad credit rating. With this in mind, the payday loan and the short-term loan may be the most suitable choices for borrowing smaller sums.
Payday Loans Repaid in 3 Months
The payday loan is a good choice of loan for those with a bad credit rating or even anyone with a good credit rating who needs to get hold of a small amount of cash to meet an unexpected financial outlay.
The payday loan usually offers between £100 and £500 with lenders asking that you repay the loan on your payday. Payday loans can be spread out for up to three paydays essentially making it a three-month loan.
When considering a payday loan you do need to take into account that the lender will be taking the agreed amount back on the payday or paydays you agree. This means you should ensure that you have enough money left from your pay after the lender takes their money back, to live on for the rest of the month. Lenders will generally make sure the loan is affordable to you by weighing up what you have coming in each month and going out to find your disposable income. This represents the sum of money left over each month.
Payday loans are often considered emergency loans. This is due to the fact that the loan can be applied for and if approved it is possible to get money from the loan paid into the bank the next day. Lenders do not focus too much on your credit rating as you are only asking to borrow a small amount and you are going to repay it back within three months.
Payday loans can be a lifeline if something unforeseen comes your way and you do not have the money to cover the outlay. This could be anything from your car breaking down and needing repairing to a flat tire that needs replacing or to cover the MOT you forgot was due. It can also come in handy when you have gone into an unauthorised overdraft and you are faced with hefty charges, if you have an unexpected bill come in or a major appliance you cannot live without needs repairing.
In any of these instances, you could borrow up to £500 and spread the cost of the loan over three payments on your next three paydays. Interest is added onto the loan on a daily basis so the quicker you can repay the loan off the less it is going to cost you.
Short-Term Borrowing Up To One Year
If you want to borrow a sum of money in the range of £500 to £1,000, you might want to consider a short-term loan.
Lenders will generally consider all applications based on whether they think the loan is affordable. This is based on the money you have coming in and what you have going out. Providing you have enough disposable income left over, you may be approved.
While short-term may differ between lenders a loan of this nature can usually be spread out for up to 12 months. While spreading the cost of borrowing out can help to reduce the monthly repayments and make the loan more affordable, in the end, it is going to cost you more to borrow. Always check the loan APR as this will determine how much interest is added on. Generally, the lower the APR the less the loan will cost in total.
Loan Options for a Larger Cash Sum
If you want to borrow upwards of £1,000 to £5,000 and do not want a guarantor loan you might want to consider a secured loan if you have a very bad credit rating.
A secured loan means the lender will ask that you secure something against the sum of money you want to borrow, which is usually your property. This means if you are not able to pay off the loan the lender can take you to court to take possession of your home.
If your credit rating is good, you might be able to get a personal loan of up to £5,000. The personal loan is an unsecured loan. The APR on personal loans will differ. The better your credit score the lower the APR and vice-versa.
Can Anyone Apply For A Loan?
Whether you have a good or bad credit rating does not matter as you can apply for a loan. However, all lenders will state certain criteria that you have to meet when making an application. This is:
- You have a regular income coming in;
- You are over the age of 18;
- You are a UK resident;
- You have your own bank account in your name;
- You have a debit card attached to the bank account;
- A direct debit can be created on the bank account.
When we say you need a regular income this means money coming into the household each month on a regular basis. This can be from work or benefits.
The lender will want to know your bank account and debit card number so they can take the loan repayments on the date or dates specified at the time of signing for the loan.
Will Lenders Check My Credit Score?
No UK lender will give you a loan without first checking your credit score. Your credit score tells them how big a risk you are. If you are only asking to borrow a small sum of money, say a payday loan or short-term loan, they will not be too worried about your credit score but will still check it. Some lenders will take a quick look at your credit file; this is called a soft credit check. If you want to borrow a larger sum of money and spread it for up to 36 months lenders will usually look deeper into your credit file.
Lenders look at such things as:
- Whether you have had credit in the past;
- If you were late with any payments;
- If you missed any repayments;
- If you have CCJs against you;
- How much credit is outstanding;
- How much of your credit you have used on credit cards;
- How many credit accounts you have opened.
Search for A Loan with Multiple Lenders from A Single Application
When searching for loans online yourself, you might find that depending on your credit rating lenders might turn you down a few times. However, the applications you have made with lenders will be recorded on your credit file and go against you as lenders might think you are desperate for money.
If you make a single application with our help, we can help to match you up with a lender from our panel. This means that you only have to fill in your details on one application to be able to search with multiple lenders. The benefits of looking for a loan with our help include:
- Search with multiple lenders;
- Make a single application which is quick and easy;
- Get an instant decision;
- Find a loan from £100 to £5,000 and spread the cost from 1 month to 36 months;
- You know exactly how much the loan will cost you;
- Lenders offer competitive rates;
- Affordable loans;
- Lenders consider your ability to repay the loan along with your credit file;
- There are numerous loan options.
If you have a less than perfect credit rating and you are looking for no guarantor loans, we can match you up with a lender from a panel of ethical UK lenders offering affordable loans. Whether you want to borrow a small sum of money to meet an unexpected bill or you need to borrow a larger sum to cover a bigger outlay, we may be able to help you find the perfect loan to meet your needs.