How to Secure a No Guarantor Loan with Bad Credit?

A low credit score can make it difficult for you to borrow money. Mostly lenders will charge high interest rates and restrict you from borrowing a larger sum. If you want to borrow a large sum, you may have to arrange a guarantor with a good credit rating.

Having someone acting as a guarantor is not a cinch because they will also lose their credit points when you make a default. Does that mean you cannot qualify for a loan? Well, that is not right.

You can get a no guarantor loan despite a bad credit rating, but before you apply to a lender, you need to ensure that your credit score falls within the range that the lender approves.

Ways to secure loans for bad credit with no guarantor

The following tricks can help you get loans for bad credit with no guarantor:

• Review your income and expenses

Even if you are borrowing a small sum, it can burn a hole in your pocket, thanks to interest you are to pay on top of the borrowed sum. Before taking out a loan, carefully examine how much you earn in a month. Apart from that, make a list of expenses. Now, determine how much you are left with after subtracting all expenses. Do you think the leftover will be sufficient to meet the debt cost?

If not, find out ways to whittle down your expenses. Not until you get rid of your debt should you rely on discretionary expenses. It is not a smart choice to borrow when you are left with very little money.

Your lender will also check the total amount of debt stand against your income. Pay heed to how much you already borrow. A high amount of debt is a red flag as it will raise doubt about your affordability. The ideal borrowing sum is one that comfortably fits into your budget.

• Determine your monthly payments

Understand the annual rates because they include fees along with interest rates. You should calculate the size of monthly instalment throughout the loan term. An online calculator can help you determine monthly payments and total payments. With the help of a calculator, you can easily adjust the borrowing amount so you do not struggle with making payments.

• Get prequalified

As you know, interest rates vary by lender, so it makes sense to carefully research the market. You should get a prequalifying letter from multiple lenders. It is an estimated quote that lenders would offer you by running soft checks.

Compare their deals based on interest rates, annual rates and fees. However, the actual rate will be quoted after running a hard check. Chances are you will get a higher interest rate than the estimated one. While budgeting, you should factor into this.

A prequalified letter is available only when you are trying to borrow a larger sum. For small emergency loans, no lender will entertain a pre-approval request.

• Arrange all documents

You can get information about documents from lenders’ websites. Talk to the customer support if you cannot get the information on their websites. The most common documents include:

• Your identity proof
• Your address proof
• Your social security number
• Your pay slip
• Income tax statements
• A recent bank statement

A few lenders would want to know about your income and expenses in the application form. Make sure you provide the correct details so as not to get into trouble later.

Most lenders make their decision for small, unsecured loans based on the information you provide in your application form. Small loans are usually expensive and paid back in full on the due date. There is no point in complicating your financial situation after borrowing more than you need.

Other ways to improve your chances of qualifying for bad credit no guarantor loans

Arranging a guarantor is one option, but hardly will any will be willing to act as a guarantor. Your guarantor will also have to bear the consequences if you make a default. Thankfully, there are various ways to qualify for bad credit loans without a guarantor.

• Apply with another borrower

Your parents or spouse can be a co-applicant provided their credit history is stellar. Your lender will offer you lower interest rates and a longer repayment term. However, note that the longer repayment term will make you a lot of interest in total. You should choose your options carefully.

• Add collateral

You can secure your loan in order to avail yourself of lower interest rates. The collateral you put down should be worth higher than the cost of the debt, so your lender can get their money back in case of a default. Arranging collateral does not guarantee that you can qualify for lower interest rates. There are various other factors as well (such as credit utilization ration, the number of missed payments and credit mix) that a lender would want to see.

• Borrow a smaller sum

You are highly likely to be refused if you borrow a larger sum. To increase your approval rate, you should try to borrow a small amount of money. A small sum will not amount to a lot of money when interest is added. However, do not apply for payday loans and high-interest instalment loans.

There could be scammers tempting you to apply for a loan from them. Check the registration details while choosing direct lender loans online. Some lenders can reach out to you through promotional emails and text messages. Do not respond to them because they can take you for a ride. Beware of advertisements that touts guaranteed approval, too, because no lender can offer a guarantee without an affordability check.

To wrap up

Most lenders will not be willing to approve your application for a no guarantor loan when your credit report is not up to scratch. You can make little adjustments in your application such as choosing a small amount to increase your approval chances. Other ways include arranging collateral and applying with a co-applicant. Compare deals offered by lenders and choose the best one.