Do you need a loan without a guarantor? Well, you're in good company. 30% of Americans have poor credit and trying to get a loan without a guarantor can sometimes seem as likely as finding a unicorn in Yellowstone park.
The truth, however, is quite different.
There are multiple options for you to choose from, depending on what you need your loan for. It's key to understand that having poor credit is not a financial death sentence. Regardless of whatever you need a loan for, keep on reading to learn all about your options for borrowing money without a guarantor on a loan.
Guarantor on a Loan: What's a Guarantor?
Before we start throwing around financial terminologies, let's start with the foundations. In this case, that's guarantors.
In short, a guarantor is more commonly referred to as a cosigner. It's someone who is legally obligated to pay back a loan in case you fail to do so. It makes it easier for the banks to sleep at night, knowing that the money they're giving out will be paid back, one way or another.
Therefore, if you have low income or your credit score is poor, it gives financial institutions pause to just hand you a loan without a guarantee that it will be paid back. This is why your application for a loan might be rejected. However, here comes the guarantor. Once you have a co-signer —a guarantor— on hand, it makes lenders feel safer about them getting their money back.
On the other hand, there are a billion reasons why you won't have a guarantor on stand-by. In this case, you still have a couple of good options. In addition, it's not only payday loans that are available to you.
No Guarantor Loans = Payday Loans?
Before we dive through your other options, it's important to clarify that not every no guarantor loan is a payday loan. The truth of the matter is that payday loans are a small segment of loans available without a co-signer.
They might be a good option for you if you're positive about your ability to handle the quick payment and astronomically high-interest rates. On the other hand, if you're already struggling with debt, then it might be better for you to avoid falling into a bigger cycle of perpetual debt.
Personal Loans
Your first stop should be checking out personal loans. They're the kind of loan (as their name suggests) you take out for personal reasons. The perk of personal loans is the generality of its purpose.
Traditionally, we see specific loans offered for specific purposes, like mortgages and car loans. However, with a personal loan, lenders don't care about why you need a loan, only that you can pay it back on time.
In a perfect world, you should have, if not good credit, then stable income as an assurance to offer your lenders, so they can approve your application. Yet, if that's not an option, there are many personal loan lenders available that offer no credit check loans. They'll accept any sort of reassurance that you'll be able to pay back the loan, regardless of your credit rating.
Peer-to-Peer Loans
If personal loans aren't working for you, then there is a whole other type of loan to aim for. These would be peer-to-peer loans.
Peer-to-peer lending is set up via individuals or private investors (unlike traditional loans with workers of a bank) lending out money through an online platform.
Furthermore, peer-to-peer lending evens out the playing field for borrowers. You'll find that borrowers and lenders are matched online according to their priorities and needs, which makes the process way less of a nightmare. It's streamlined, quick, and they tend to offer better rates for the borrower.
The trick here is to do intensive research before applying, as the loans tend to be quite competitive.
Other Small Lenders
It's essential to understand that not all lenders think alike. If you've been rejected from one lender, that doesn't mean that your rejection from another lender is already in the mail.
Make sure to shop around smaller institutions, which includes regional banks and credit unions. Moreover, when choosing a new bank, Sarah Minter from MoneyTrumpet.co.uk suggests finding out what fees may be associated with overdrafts.
In addition, as with peer-to-peer lenders, you'll find other online lenders willing to approve loans using different ranking systems that glorify your credit and income and ignores everything else. For example, you'll find online lenders that take your educational background into account.
Check out Student Loans
If you're trying to get a loan to finance a degree, then there are a plethora of options available to you as a student without a co-signer.
Your first step should always be applying for federal student loan programs —otherwise called Direct Loans— via your school's Financial Aid office. All you need to do is fill out the FAFSA form, and provide all the required information about your finances.
What's great about federal student loans is its flexibility regarding repayment as well as tackling payment issues with interest costs. It's one of the most borrower-friendly loans out there, so make sure you're taking advantage of that fact.
Ask to Borrow Less
It's not only what types of loans you apply to, but it's also how you apply to them, especially with bad credit ruining the mood. A great way to turn a loan application rejection is to ask to borrow less than your original amount.
This will help improve your debt-to-income ratio and make it more palatable for the lender to let you borrow the money without a co-signer.
Demystifying No Guarantor Loans
Having bad credit is not the end of the world. We all have to start somewhere. The trick is getting the right financial advice, as well as doing your research before applying for a loan.
Now that you've learned all about your options for borrowing money with no guarantor on a loan, you can start doing your homework and applying to the loans that best fit you and your financial needs.
Yet, there is still so much more to learn. Whether you're wondering about the types of mistakes to avoid when looking for an auto loan or what types of loans are out there, make sure to check out our money section for the latest tips and tricks.