When you have bad credit, a guarantor loan is often touted as the best option. It makes sense for a lot of people: you’re often able to get a larger loan for a lower interest rate with you have someone with excellent credit that is willing to pay your debt if you default on payments. You usually don’t have to go through a full credit check, either, as the guarantor is the person taking on the responsibility of the loan payments, so a complete credit check is run on them, instead.
However, not everyone has someone who is willing or able to be a guarantor for them. After all, asking someone to take responsibility for your debt is a massive favour, which is, coincidentally, exactly what companies offering guarantor loans is reliant upon: their clients being unwilling to cause upset in their personal relationships by not keeping up with their loan repayments. If you don’t have anyone that you can ask to be a guarantor, or do not want to put your friends or family in that position, then there are other options available to you when you need non guarantor loans for bad credit.
When Should I Apply For Bad Credit Loans?
Whenever you consider applying for credit, it is always worth considering if you actually need a loan, or if you can get the money together by alternative means. Are you able to borrow the money from friends or family? Can you pawn or sell unwanted items? While they may not be the first options you think of, these options will generally be cheaper in the long run, and so it is worth exploring them before you apply for non guarantor loans for bad credit. If these options aren’t available to you, or don’t cover the full amount that you need, then a non guarantor loan is an option that is still available.
What Do I Need To Know About Non Guarantor Loans For Bad Credit?
The first thing that you should be aware of when applying for a loan is how much it will cost to repay it. This is known as the APR, or the annual percentage rate of interest that lenders expect you to pay. The APR is dependent on several factors, such as your credit history and the lender that you’re applying with. As a general rule, lenders will offer people with excellent credit scores larger loans at cheaper rates, as they are less of a risk than those with a poor credit history, or little credit history at all. One thing to remember is that APR is the annual rate of interest, so short term loans often have higher interest rates, as they are repaid over a few weeks or months.
Aren’t Payday Loans Expensive?
Because people with poor credit find it extremely difficult to get low interest rates, payday loans are generally considered to be expensive, which is why it is best to look into other options first. The APR on non guarantor loans for bad credit is often high, regularly over 1,000%, however it is worth bearing in mind that the overall repayment for a relatively small loan is not going to cost thousands of pounds, as payday loans are offered with repayment periods over weeks and months, not years.
Can A Loan Help Me Rebuild My Credit Rating?
As long as you keep up with repayments, your credit rating will improve as you repay the loan, which will make it easier for you to obtain credit in the future. However, as short term loans are an expensive option for most people, if you are looking to get out a loan just to improve your credit rating, it is worth looking into credit building credit cards instead, and make small purchases which you can pay off at the end of the month, as this is an easier and more long term way of rebuilding your credit rating.