There is a certain type of loan with the name of guarantor loans. These loans are targeted at people who cannot get a loan themselves due to a bad credit rating. The loans can work as they are supposed to work in many cases, but in others, things can go terribly wrong for the person standing as guarantor. Here we are going to look at why loans without guarantor might be a better option for borrowing.
What Are Guarantor Loans?
When taking out a guarantor loan the person wanting to borrow money has to find someone who will stand by their side when they sign for the loan to say they will take over the loan in the event that you cannot repay it.
This means a good friend or relative is putting their name to the loan along with you. If all goes well and you pay off the loan, the guarantor does not have to do anything. If you cannot make the repayments and default on the loan, it is then down to the person who stood guarantor to repay the loan.
Guarantor Loan Problems
In 2017, the Citizens Advice revealed that the number of people who had gone to them to seek help because they had been a guarantor had increased by 40% in one year.
Most of the issues with guarantor loans come around due to the guarantor not realising what is involved if they sign up for the loan. In many instances, people had sought help because the loan had fallen on their shoulders due them standing as guarantor and they were faced with thousands of pounds of debt.
An example of this was of a man who had stood by his daughter and acted as a guarantor when she wanted to borrow £2,000. The man agreed with his daughter but the loan company did not contact him in any shape or form and he was not asked to sign anything. He was not given any information about the loan and what was expected of him so did not realise that he was liable if his daughter failed to repay the loan. The man was unemployed at the time. When his daughter found she could not make the loan repayments the debt fell on him and the loan company contacted him to pay off the debt.
More recently in 2019, it was reported that an unethical loan company had approved a loan for someone who had asked an autistic man who was on a minimum wage to stand as their guarantor. Even worse was the fact that the vulnerable man stood as guarantor for a loan of £3,000 despite the fact that he lived hundreds of miles away from the women, and he only knew the women through Facebook.
These are just two of the many cases that saw people seeking advice about guarantor loans and there has been many more. Citizens Advice are now campaigning for loan companies to provide guarantors with letters of agreement so the person knows what is expected of them if they stand guarantor.
Consider Choices of Loans without Guarantor UK
Loans that do not require a guarantor might be a better option for anyone seeking a loan in the UK. Many types of loans do not need a guarantor and even people with poor credit ratings can apply for them.
Loans such as these mean:
- You do not have to talk to someone about your finances;
- You do not have to tell someone you have a poor credit rating and cannot get a loan without their help;
- You do not have to get someone to sign up with you for the loan;
- There is nothing confusing about the repayments of the loan as you alone are accountable for them.
Types of Loan That Don’t Require a Guarantor
Loans without guarantor UK may be a better option for everyone involved, particularly to help avoid disturbing cases like the two highlighted above.
Popular alternatives to guarantor loans include:
- Personal loans;
- Short-term loans;
- Payday loans.
Personal loans are admittedly one of the hardest types of loans to find approval for if your credit rating is particularly bad. On saying this, the panel of lenders we work alongside to match you up with loans do consider your current circumstances along with your credit rating. You may be offered a loan if the lender believes you have the ability to repay it.
With a personal loan, you might be able to borrow up to £5,000 and you could spread the repayments for up to 36 months.
Your credit rating is going to have some effect on the APR of the personal loan. As a general rule of thumb the poorer your credit score, the higher the rate of interest. Of course, we work alongside lenders who offer affordable loans with competitive rates based on your circumstances.
Short-term loans are a popular way of borrowing money without needing a guarantor and lenders usually offer between £500 and £1,000. This type of loan may be suitable if you do not need to borrow as much as what a personal loan offers or your credit rating means you cannot get acceptance for a personal loan.
One of the benefits of a short-term loan is that the repayments could be spread out for over a year. This means you do not need to tie yourself into a loan that is repaid over several years. When considering a short-term loan you do have to check the APR. The annual percentage rate is what determines how much interest will be added onto the loan.
Another consideration is the length of the loan. The longer you take the loan over the more you are going to pay overall for the loan.
Payday loans are an option if you need to get hold of a small amount of money fast, usually between £100 and £500.
This type of loan is generally easier to get approval for even with a poor credit rating as the amount of money borrowed is classed as being small by lenders.
The payday loan is popular with people who have come up across an unexpected financial outlay and who don’t have the funds to cover it until next payday. Payday loans can be repaid in full on your next payday or you can spread the cost of the loan for up to three paydays.
Payday loans can be an expensive way of borrowing if you find that you cannot pay the loan in full on the date or dates agreed. Providing you know you can clear the loan as agreed, they can work as they are designed to do.
While not very popular or advisable when borrowing smaller amounts of money there is a loan called the secured loan.
With this loan, you do not need a guarantor but you do have to secure something against the loan and this is usually property or your car. For people with a very bad credit rating the secured loan may be the only option available instead of a guarantor loan.
The personal loan, short-term loan or payday loan may all be a more suitable option to the secured loan.
Making an Online Application Takes Minutes
It takes just minutes to make an online application and a decision is made within minutes. All you need to do to apply for a loan online is:
- Tell us your age – you have to be over 18;
- Give us your address – you need to be a resident in the UK;
- Tell us how much you have coming in and what you pay out each month – you have to have a regular income;
- Give us your bank account details – including debit card number;
- Make sure a direct debit can be created on the bank account.
We can search with a panel of UK lenders to try to match you with the loan you requested. If successful, you can check the details of the loan and once you are happy you can go ahead and sign up, without needing anyone to stand as your guarantor.
Guarantor loans do have their place in the loan world providing both parties fully understand what they entail. However, they can cause issues, both financial and in relationships and they are not appropriate for everyone.
If you do want a guarantor loan, make sure you apply for it with an ethical lender who gives both you and the guarantor the information required to make a decision of whether the loan is right for you.
Luckily, there are options for loans without guarantor that even people with a poor credit rating can apply for. We work alongside a panel of UK lenders offering numerous loan options even for people with poor credit. You can make an application within minutes and find out if your application is successful fast. The application is made online and if we match you with a lender, the funds from the loan could be placed directly into your bank account on the same day