Guarantor loans can be a great way for people with bad credit to access better rates, more credit and start rebuilding their credit score. But what happens if you can’t find a guarantor?
There are many reasons why you could run into trouble finding someone to co-sign on loan. It can be difficult to talk to family and friends about money, you may be worried about the strain finances could put on your relationships, or perhaps your family and friends aren’t in a position to act as your guarantor.
If you find yourself in need of a loan but can’t find a suitable guarantor, try not to worry- there are plenty of other options around, even if you have bad credit.
1 – Check Your Lender’s Guarantor Requirements
There are common misconceptions about what makes a guarantor qualified to co-sign on loan. Contrary to popular belief, your guarantor does not need to be a property owner, a relative or in a ‘professional’ career to support your loan application.
The basic requirements for a guarantor is that they are over 21 years old, and have assets that cover the cost of your loan. Some lenders might ask that your guarantor meet additional criteria (such as providing proof of regular income), but this is only at their discretion.
If you aren’t sure what your lender needs from a guarantor, talk to them about it. You could be pleasantly surprised and discover that you have friends, family or even colleagues who are eligible guarantors.
2 – Overdraft
An overdraft is an agreed limit up to which you can overspend on your bank account. When you enter into overdraft, you are in debt to the bank; however, unlike personal loans, credit cards or payday loans, there is no set deadline for repayment.
Many current accounts have an overdraft facility, so if you are not already using one, it might be a good idea to ask your bank whether they could arrange one for you. Depending on your earnings, credit rating and how long you have held the account, you could be eligible for an overdraft of up to several thousand pounds.
Although overdrafts can be a flexible and convenient way to borrow, they are expensive compared to traditional loans and credit cards. Even though there is no set date by which time you have to repay the debt in full, you will be charged interest on any outstanding balance every month.
At the moment, some lenders also charge monthly fees for overdraft use, although this is about to change and new rules are coming in to abolish overdraft fees. Instead, UK lenders will charge a flat interest rate, averaging 30% APR on the total balance you owe.
If you only need to borrow a small amount of money over a short amount of time, an overdraft could be a great solution for you.
3 – Peer-to-Peer Lending
Peer-to-peer lenders are relatively new but can be a great option for people who need alternatives to traditional loans or are willing to try something new in an effort to save money.
These companies (usual websites) pair off people who are willing to lend money with people who want to borrow.
Unlike a traditional loan, there is no bank involved, which means that the peer-to-peer lenders can often afford to loan money at more competitive rates that you’ll find on the high street.
Most lending companies will charge an application fee, but if you have a reasonable credit score, you can find some excellent interest rate deals which could make the application fee worth paying.
Peer-to-peer lending is also suitable for people with bad credit as some lenders are willing to take the risk on borrowers with poor credit scores. Even though these lenders are almost certain to charge a higher interest rate, peer-to-peer borrowing may well be cheaper than other non-traditional loans- such as payday loans- and can offer borrowers more cash over longer periods of time.
Like other lenders, peer-to-peer companies are monitored by the UK’s Financial Conduct Authority, meaning that they are subject to the same rules and regulations as traditional financial institutions.
4 – Budgeting Loan
The UK government offers interest-free loans of up to £821 to people who receive certain benefits. Budgeting loans can help pay for maternity costs, funerals, furniture, clothing, travel and other expenses related to improving your circumstances.
You can find the full list of things you take out a budgeting loan for here.
If you claim Income Support, income-based Jobseekers Allowance, income-related Employment and Support Allowance or Pension Credit, you could be eligible for a budgeting loan.
You’ll have up to 2 years to pay it back, and over this time repayments will be automatically deducted from your benefits.
5 – Bad Credit Card
For borrowers with bad credit, finding a lender willing to take you on can be a headache. Fortunately, some lenders have credit card options available for people with bad credit history who would like to borrow money and rebuild their credit score.
The main difference between ‘bad credit’ credit cards and standard cards is the interest rate- bad credit cards will typically charge 30-40% APR on your balance.
However, if you remember to pay off your card each month and avoid maxing out the card, this can be a good way to rebuild your credit while you borrow money.
6 – Fast Loans
Fast loan lenders – companies that offer payday loans, quick loans and ‘no credit check’ finance- are more likely to accept people with bad credit scores than high street banks and can often deposit cash into an account within hours of an application being made.
However, they charge some of the highest interest rates in the industry and can be notoriously inflexible when it comes to repayment. Although taking out a fast loan can quickly supply the cash injection you’ve been looking for, it is important to read the terms and conditions very carefully to be sure that you can afford repayments and fully understand your obligations.
If you fall short on either of these fronts, you could be hit with steep penalty fees, mounting debt and end up in a worse financial state than you started in.
How Can Flexy Loans Help?
Here at Flexy Loans, we have partnered with some of the UK’s leading Lenders.
They have already helped thousands of people get loans already, and they can do the same for you.
Choosing a loan broker like us (we don’t charge any fees) means our application process matches you with the best loan available to you. All lenders we recommend are regulated by the FCA, which gives you an additional layer of protection.
To apply and see what loan is available to you, click on the below and answer the question