There are times when you need financial assistance, but your loan provider states that you are required to have a guarantor to secure the loan. Such situations could tie you up, but there is always an alternative. If you are looking to get a loan but can’t get a guarantor or you have bad credit, you can go for loans that don’t require you to have a guarantor.
Well, such loans are not always easy to acquire and they often have a higher interest tied to them, but hey, they are better than getting nothing at all if you really need financial help. In this guide, you will learn more about no-guarantor loans, how they work, when you can take one, and whether they are good or bad. Let’s get started!
1. So, what are no-guarantor loans?
A no-guarantor loan is a loan that does not require another individual – typically a family member or friend – with a better credit rating to co-sign the loan agreement. Said with a few words – they are loans without a broker or a guarantor. A guarantor is often required by some loan providers to ensure that they can take responsibility and repay the loan should you default for whatever reason. That way, the lender can rest assured that their chances of getting repaid are higher than if they granted you the loan without tying it to someone else.
With no guarantor loans, there is no middle person to take care of the security of the loan. This makes such loans riskier for the lender, which is why the borrower has to make up for the risk by paying more to clear the loan. As if the expensive nature of such loans is not a disadvantage enough, it’s not so easy to get a no guarantor loan. You often have to provide the required paperwork and pass various affordability checks which beats the purpose if you are looking for a quick way to get some extra cash.
2. How do they work?
The name of these loans says it all. No-guarantor loans work by allowing you to borrow a certain amount of money without requiring a guarantor to repay the loan if you are unable to. You are required to make repayments until you have cleared the full amount just like with normal loans.
As such, you might be wondering what the difference between a bad credit loan and a no-guarantor loan is. Well, no-guarantor loans are actually almost the same as bad credit loans, taking into consideration that they have quite a lot in common. People who seek no-guarantor loans typically have bad credit.
No-guarantor loans are usually categorized under the classification of unsecured loans which means that they share some characteristics with loans such as payday loans, unsecured personal loans, peer-to-peer loans, and other unsecured loans.
3. When you can use them?
No-guarantor loans come in handy when you have a bad credit status yet you require financial assistance. If you have bad credit, it’s almost given that getting a guarantor to secure your loan is almost impossible. Other than getting a guarantor, the other option would be to use your properties to secure a loan. If those two options are not available, then getting a no-guarantor loan should be a viable option.
It’s recommended that you go for the no-guarantor option only in the direst situations. If your financial needs can wait, then it’s probably better an idea to hold them until you have the required money. You should also consider other available options such as seeking help from a family member or friend before having to resort to a no-guarantor loan.
4. Are they good or bad?
To determine whether no-guarantor loans are good or bad, it’s important to understand what their benefits and drawbacks are. In that light, let’s have a quick look at the pros and cons of no-guarantor loans.
The Pros
- You won’t have to burden someone else to take responsibility for your loan, which allows you to retain a good relationship with your family members and friends
- Depending on the situation, getting a loan without a guarantor is usually faster since it’s between you and your lender
- No-guarantor loans are feasible for emergency needs such as clearing a medical bill or paying for your car repairs
The Cons
- The higher interest rates of these loans make them more expensive
- Due to the absence of a guarantor, the amount that you can borrow is usually limited
To sum it up
No guarantor loans are a viable financial assistance option whenever you are caught up in a situation that requires urgent financial assistance, yet you cannot get yourself to access a guarantor. While such loans are often practical in several situations, there are times when they do more harm and less good.
For this reason, it’s important to research beforehand to ensure that you get the best available options if you have to use such a loan.