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16 Jun 2021
Jamie Gibbs Jamie Gibbs

No-guarantor loans: how do they work?

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Worried about getting a loan without a guarantor present? There may be other options for you.

If you’re struggling to be accepted for loans, or if you’re worried about your credit rating, you might have heard of guarantor loans.

But what if you don’t want a guarantor, or if one isn’t available? Let’s take a look at what you can do.

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What's a no-guarantor loan?

A no-guarantor loan is where you borrow money without the use of a guarantor.

A guarantor is someone you trust – and who trusts you – who agrees to make repayments on the loan if you can’t.

With a no-guarantor loan, you borrow the money, and you make the repayments to the lender until the loan is up. There’s no middle person involved.

 

What's the difference between a no-guarantor loan and a bad credit loan?

If you’re thinking that a no-guarantor just sounds like a normal loan, you’d be right. Unsecured personal loans – like the ones we compare – don’t require a guarantor.

So, why is ‘no-guarantor’ a thing?

Often, people looking for no-guarantor loans are those with bad credit who want an option that doesn’t require a guarantor. This is actually called a bad credit loan.

 

What's the difference between a no-guarantor loan and a payday loan?

Payday loans don’t need a guarantor, in the same way that most other types of loan don’t need a guarantor.

But payday loans often come up when someone with bad credit wants to borrow money.

This is because payday lenders tend not to do credit checks, so having bad credit might not be that big of an issue.

But you should thoroughly consider your options before going down this route.

A payday loan might seem easier, but the interest rates tend to be much higher in comparison to other types of loan.

 

What are the pros and cons of a no-guarantor loan?

The biggest advantage of a no-guarantor loan could be that you don’t need to burden someone with the financial responsibility of making payments for you.

With a guarantor loan, a family member or trusted friend agrees to take on the debt if you can’t make the repayments.

There’s the potential of putting strain on your relationship with them should the agreement turn sour.

Taking out a loan without a guarantor takes out this risk.

Also, without the added red tape, you might find that getting a loan without a guarantor is faster.

One of the disadvantages is that no-guarantor loans could have higher interest rates as the borrowers involved tend to have a poor credit rating.

This in turn makes payments more expensive and it could become difficult to keep up with the loan, adding further financial strain.

Another downside is that the amount you’re able to borrow could be lower without a guarantor. Without that added level of security, lenders could be hesitant in lending you a large sum.

 

Can I get a loan without a guarantor?

There are many types of loan available that don’t require a guarantor.

For example:

 

Personal loans

Also called unsecured loans because they don’t need any kind of security like your car or house.

You can compare personal loans with us for loans between one and five years. Comparing loans here doesn’t impact your credit score.

 

Secured loans

This is where you offer up your house or car as collateral. Secured loans tend to have more favourable interest rates because of this.

But if you fail to keep up with your repayments the lender could repossess your house or car.

For more information, check out our guide on the difference between secured and unsecured loans.

 

Bad credit loans

If your credit rating is poor, there are loan agreements that are more geared to your situation.

Interest rates tend to be higher but paying off the loan on time could be one way to help build your credit rating back up.

 

Will a no-guarantor loan impact my credit rating?

Most kinds of borrowing tend to have some kind of impact on your credit score. This is especially true if you make multiple applications in a short period of time.

If you’re still weighing up your options, it’s worth considering comparison services (like ours) that only do soft credit checks beforehand.

A soft credit check is one that doesn’t leave a mark on your credit rating. This lets you compare loan deals without jeopardising your chances of borrowing money in the future.

Once you actually apply for a loan, though, the lender would then make a hard credit check. This could impact your credit rating.

 

Do I need a loan without a guarantor?

You’ll need to weigh up your options and decide what’s best for you.

But before you make any decisions, ask yourself:

  • Can I afford to make the repayments every month?

  • Is my income steady enough to take out a loan?

  • Can I improve my credit score before applying for a loan?

 

If the loan isn’t urgent, you might want to consider giving your credit rating a boost. Some ways you could do this include:

  • Requesting a credit report and making sure your details are up to date

  • Getting on the electoral roll

  • Considering a 0% credit card to make repayments little and often.

For more information, check out our guide to improving your credit score.

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