What is a Loan Without Guarantor?
There are different types of loans. Those with bad credit scores and who have had debt issues can find it complicated to get a loan. For such cases, a person can consider getting a guarantor loan.
For example, you need a loan and have a bad credit score. One of your friends or family members with a good credit rating becomes the guarantor. If you fail to pay the loan, the guarantor will do it for you. In other words, it will be responsible for the debt.
On the other hand, a loan without a guarantor is precisely what the name suggests – the loan where you don’t need another person to be responsible for your debt. However, getting this type of loan is usually possible only if you have a good credit rating.
Bad Credit and No Guarantor – Is Getting a Loan Possible?
When you have a bad credit rating, an option with a guarantor is the one that can get you the loan. Every lender will check out your credit score. When it’s bad, the chances to get a traditional loan significantly reduce.
But what if you can’t get a guarantor? Even in such situations, you still can get a loan. There are two main options to consider.
Loans designed for bad credit
These loans are created for people who had debit problems before and now have a bad credit score. They come with a downside, and that’s the fact interest rates can be extremely high. On the other hand, their main advantage is that a guarantor isn’t required.
Secured loans
These loans require you to put an asset, for example, your car or home, as security. When compared with previously mentioned loans, these have lower interest rates. But, considering that you’ll be putting a valuable asset as the form of security, these are far riskier. In case you fail to repay the loan to the lender, you can lose the asset.
Pros and Cons of No Guarantor Loans
When considering the available options of no guarantor loans, consider their pros and cons. Every loan comes with some advantages and drawbacks, and the same goes for no guarantor options:
Pros
- The procedure of getting such a loan is faster
- There’s no need to look for a guarantor
- There’s no risk of damaging the relationship with your friend or a family member
Cons
- No guarantor loans come with higher interest rates
- The selection of loans is limited, especially if your credit score isn’t good
- The amount you can borrow usually isn’t high as the amount you can get when having a guarantor on your side.
As you can see, these loans have good and bad sides. Getting the loan is more straightforward and faster because no third party is involved. But, the result is more expensive monthly payments.
Things to Consider Before Applying for a No Guarantor Loan
If you are planning to apply for a no-guarantor loan, there are several things to consider. Every loan represents a burden and a pretty serious commitment. In addition, no guarantor loans come with higher rates, making them more expensive. With that said, it’s vital to think it all through.
- If you need the loan for something of utmost importance, ensure you’ll be able to pay the monthly rates.
- Always read and get informed on loan rules, especially about charges and fees.
- Every loan-related move is recorded and will affect your credit score. Still, you can reconstruct the rating if you manage to pay monthly rates on time.
Conclusion
When you have a really bad credit score due to some financial challenges from the past and you can’t produce a guarantor, it doesn’t mean you can’t get a loan. However, the rules are a bit stricter, and fees and expenses, in general, are higher. Before applying for a no guarantor loan, consider whether you need that loan or not, and ensure that you can repay the rates in time.
Aunt Piggyy
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