Read our handy guide to no guarantor loans below - what they are and who can apply for one.
What is a no guarantor loan?
A no guarantor loan is where you alone manage the loan you take out and you don’t need another person to sign or guarantee that the loan will be paid. The loan agreement is between you and the lender.
Whilst these types of loans can be generally accessible thorough typical high street finance, in some instances these types of loans can be aimed at people with poor or bad credit scores.
As a result, lenders who consider applications from those with adverse credit generally offer loans which feature higher APRs. Typically, this is because most lenders see lending to someone with bad credit as risky. Applying for a loan with a guarantor can reduce that risk in some cases.
Applying for a Vanquis Loan
We may offer loans directly to eligible Vanquis credit card customers via email, SMS or through the Vanquis Bank App.
If you're new to Vanquis, you can use our online loan calculator to see if a loan would be right for you and if you're happy you can then apply online. To apply you'll need:
- your address details
- information on your income and outgoings
- details for any current credit agreements such as other personal loans or credit cards
What is the difference between a secured loan and a no guarantor loan?
A secured loan is a loan where the lender requires something to act as security in case you can’t pay the loan back. This can be an asset you own, such as your home. Interest rates tend to be lower as there is less risk for the lender. This can be risky for the borrower though. If you fail to meet the payments you could lose your assets.
With a no guarantor loan, in many instances you don't need any form of security – although this can vary from lender to lender. This can be seen as a risk by the lender though. As a result, they can feature a higher rate of interest and a limit on how much you can borrow.
As with most loans, there are certain conditions you need to follow. Here's what you need to apply for a no guarantor loan:
A strong credit score
A strong credit score shows lenders can rely on you to manage your debt. You can find out your credit score by getting a copy of your credit file.
There are three main credit reference agencies in the UK - Equifax, Experian, and TransUnion. You can use these agencies to obtain your credit file, check the details and get a complete picture of your credit history.
If you have a poor credit score, there are things you can do to improve it:
- Register on the electoral roll
- Check for mistakes on your credit file
- Pay your bills on time
Good income/debt ratio
Your debt-to-income ratio (DTI) is the amount of your income that you use to pay off debts each month as a proportion of the total amount. The lower your ratio, the more likely you are to be approved for a loan. If the ratio is high, lenders may be less likely to grant you a loan.
To find out what your DTI ratio is, you need to work out your monthly costs. Do this by adding your debt payments and divide it by your gross monthly income. For example, if you earn £2,000 and your debts were £1,000, your DTI ratio would be 50%.
Employed with a steady income
If you have a steady income, lenders may be more likely to consider your loan application. As well as ensuring you meet their affordability criteria, they want to know you can afford to pay back the money you borrow from them.
Please note that this can differ depending on your job status though and if you're self-employed you may not always be able to show a pattern of steady income.
Eligibility for non-guarantor loans with bad credit
If you have bad credit your options may be limited. There are some loans which come with low borrowing limits and high interest rates. You may still be able to apply, but be aware they could be more costly in the long run.
Here are some things to consider before you apply for a loan:
Are the repayments of a non-guarantor loan affordable?
If you're thinking of applying for a loan, it helps to know if you can afford to do so first. There are a few things you can do to make sure this is the case. As mentioned above, you can check your DTI ratio to work out your monthly costs. The lower the ratio, the more likely you'll be to afford it.
You can use a loan calculator to work out the monthly payments. This will give you a better idea of what the costs will be. It also allows you to work out your finances without running a credit check. This will only happen once you apply for a loan.
Please note that if you fail to make any payments it can damage your credit score.
Is your non-guarantor loans lender charging penalties for prepayments?
If you think of repaying the loan early, some lenders charge interest beyond your final payment. Therefore, you must read the entire set of conditions proposed by the lender when borrowing.