Unsecured personal loans bad credit no guarantor is quite a mouthful but for people with bad credit who want a loan but who don’t want to ask someone to stand as guarantor, this is exactly what they look for. So let us break this down into something that is easy to understand.
We will look at:
- What an unsecured personal loan is;
- What bad credit is;
- What a guarantor and guarantor loan is.
First, What Is An Unsecured Personal Loan?
An unsecured loan is any type of loan, usually called a personal loan, which does not require you to secure something against the amount of money you want to borrow. The level of unsecured debt in the UK is at the highest level it has ever been.
It is the absolute opposite of a secured loan. The secured loan means that you put something of extreme value, usually your home, up against the amount borrowed. There are typically large sums of money, many thousands of pounds, applied for with secured loans, so the lender is taking a huge risk and therefore requires collateral on the amount borrowed.
The unsecured personal loan is a loan taken out without having to put your home or anything else up as collateral. The personal loan can usually be applied for, for just about reason, although some lenders will ask why you need the loan.
The sum of money offered with a personal loan is going to rely on the lender and your credit rating. A typical personal loan for someone with bad credit might offer up to £5,000 and the repayments might be spread over a term of up to 36 months. Again, this is going to depend on your credit rating and the lender.
What Is Bad Credit?
The term bad credit is applied when talking about the credit file and credit rating of someone. If you have a poor credit rating, you are considered as being in bad credit. With adverse credit, you may have difficulty getting a loan compared to someone who has a good credit rating.
When you submit an application for a loan or credit card, the lender uses credit reference agencies to look into your credit file and credit rating to determine the risks. The main credit reference agencies in the UK are Equifax and Experian. You might be considered as having bad credit with Equifax if your credit rating is between 0 and 278. With Experian, your credit rating is seen as bad if your rating is between 0 and 560.
Your Credit File Determines Your Credit Score
Your credit file and credit score are two different things. Your credit file and what is in it goes towards determining your credit score. For instance, if you have CCJs and late repayments on your credit file these affect your credit score negatively. If your credit file shows you are a responsible borrower, and have borrowed only a small sum of money in the past, and repaid it on time without issues, this will have a positive effect on your credit history.
What Is A Guarantor?
A guarantor is someone who is willing to stand by your side when you sign up for a loan to promise to take over the loan in the event you fail to repay it. A guarantor provides the lender with more reassurance so a guarantor loan may be easier to get approval for if your credit rating is very bad.
To be able to apply for a guarantor loan you would have to be in a position to ask someone close to you, a friend or family member over the age of 18 with a respectable credit score, to stand as guarantor. This can be difficult and put strains on relationships and is one of the reasons why many people shy away from guarantor loans.
If you were to fail to make the repayments on the loan as agreed the lender would then contact the guarantor and they would have to take over the loan and repay it. As guarantor, they are also risking their credit rating being affected, as it would show up on their credit rating.
Put It All Together and the Result Is Unsecured Personal Loans Bad Credit No Guarantor
Put all the above together and what you get is people with bad credit looking for a personal loan that is unsecured without having to find a guarantor. Thankfully, there are such loans out there and lenders who are willing to offer them.
Alternative Loans without a Guarantor for Bad Credit
The unsecured personal loan is not the only loan that might be suitable if you have bad credit. However, it may be the only choice for a loan if you want to borrow a substantial amount of money and spread the cost of the repayments out.
Alternative loan options to consider based on the amount of money you need to borrow and how long you want to spread the repayments include:
- A payday loan;
- Short-term loan.
Both of the above types of loans can be applied for, for personal use, if you only want to borrow a relatively small sum of money and can afford to repay the loan back quickly.
A payday loan is one of the types of loan most applied for in the UK by people with bad credit who need to get their hands on money fast. The typical payday loan might offer between £100 and £500 with the loan being repaid for up to three months.
This type of loan is classed as an emergency loan. There is no guarantor needed and the loan does not need to be secured.
The short-term loan is a similar type of loan. A sum of money, generally up to £1,000 is borrowed and repaid in less than one year. This depends on the lender of course, with some offering more or less.
Applying For a Loan with Bad Credit
To be able to apply for an unsecured personal loan you should be over 18, live in the UK, have a regular monthly income, a bank account with a debit card attached and be able to set up a direct debit.
We can make applying for unsecured personal loans bad credit no guarantor easy. Just tells us how much you want to borrow and the term of the loan (how long you want to repay it over). We will then match you up with a lender offering competitive rates and affordable loans. The lenders we work with provide access to numerous loan options and while they will check your credit rating, they also base personal loans on your verifiable income.