They’ve been in the news a lot lately, guarantor loans. A lot of politicians and campaigners want them to be much more tightly regulated than they are now because the amount of money they charge and the way they treat borrowers and guarantors should they fall behind on payments.
We don’t offer guarantor loans here at 786 Loans because we don’t think they’re the right product for our customers. However, if you’ve got a less-than-perfect credit history, is it really possible to get a long-term loan for up to 12 months without needing a guarantor?
Why do people with bad credit sometimes struggle to find a loan?
The reason why people with bad credit often fail to find a loan is for two reasons:
- It’s harder for them to be accepted because their credit report suggests that there’s a higher than average chance that they won’t pay the loan back in full.
- They’re applying to the wrong lenders.
There’s something really important that a lot of people in the UK population don’t know about – and that’s how loan companies make their mind up on whether to give someone applying for a loan the money that they’re looking for.
Think of these criteria as a checklist. On that checklist, someone from a loan company is giving you tick when you’ve given them the answer they want and crosses for answers that they don’t want. Once the person from the loan company has ticked or crossed each box and added up the score, that tells them whether you’re the type of person they like to give a loan to.
There are plenty of loan companies in the UK lending to people with poor credit histories every day. Thinking about the checklist again – imagine there are 50 boxes on it. Your bank might want 45 ticks out of 50 but a bad credit loan provider might only want 20. The truth is that, for most borrowers, there’s going to be someone who wants to lend them money. The secret is to find the lender whose checklist your personal and financial circumstances most closely match.
As long as you can show on your application that you can afford the loan, you’ve got a great chance of getting a bad credit loan even if you’ve had less than perfect financial history.
So, what is a guarantor and why would you need one? A guarantor is someone who promises to pay back the remainder of your loan if you are unable to pay off.
How can a guarantor help with a bad credit loan application?
If you want to apply for a loan and you’ve found a guarantor, both you and your guarantor will be extensively questioned and your guarantor’s credit check will be conducted as part of the application.
You can borrow more and over a longer period with a guarantor loan. However, the loans are not cheap and there’s currently an investigation into guarantor loan companies by the Financial Conduct Authority, the interest rates they charge, and the way they treat customers who have fallen into arrears on their account.
What are the downsides to using a guarantor?
Amigo Loans, one of the UK’s largest payday loan companies, “is “aggressively” pursuing court action against thousands who miss payments”, according to the Times newspaper. The newspaper interviewed former members of staff who accused the company of:
- Encouraging customers to lie about whether they could afford a loan or not
- Bending rules during the application process
- 12,000 guarantors being chased through a court
- Customers and guarantors being “stalked online” via Facebook so that Amigo could try to obtain a court order to take money from their wages
- Incentivising sales and collection staff, which may put the interests of the company and their staff ahead of vulnerable borrowers
Search the internet and you can find many internet forum contributors describing how they have ruined family relationships and long-standing friendships when a guarantor loan company starts chasing your guarantor for the money that a borrower cannot afford to pay back.
Is it true that people with bad credit can get a loan without a guarantor?
Yes. In fact, there are over 100 companies in the UK, which lend to borrowers with bad credit. That’s great news but an even better news is that, unlike with guarantor loans, longer-term loan companies offering credit for up to 12 months have special rules on how they look after borrowers by the Financial Conduct Authority.
If you take out a long-term loan with a bad credit lender, you’re protected in the following five ways:
- You’ll never pay more than 80p interest a day for every £100 borrowed
- You’ll never pay more than £15 if you miss a loan repayment
- Your loan company may only attempt to take payment twice from your account. If they fail on both occasions, it’s illegal for them to try to take money from you again without your permission
- You’ll never pay back more in interest and fees than the original loan amount itself
- If you fall behind on your agreement, your lender must point you in the direction of debt help charities.
Find a no guarantor loan with 786 Loans
Just like with all other lenders, longer-term no guarantor lenders have their own checklists – these checklists tell us the type of borrowers they like to work with.
Rather than making dozens of applications to lenders where you genuinely don’t know if you’re going to tick the right number of boxes, try 786 Loans instead. We’ll act on your behalf – just fill in our application form and our computer then selects the lenders most likely to want to give you a loan.
We’ll then show you all the deals we’ve found and it’s up to you to choose the loan that fits best around your lifestyle. You can compare the loans at your leisure. There’s no charge to our service even if you decide not to take the loan.
If you decide to go ahead with the loan, read the terms and conditions and accept them. You’ll have a direct relationship with your lender. 786 Loans receives a “thank you” payment every time a loan is made and you won’t pay any more for your loan if you apply through 786 Loans.