How Does A Non-Homeowner Guarantor Loan Help A Tenant?

May 21, 2024

Sometimes, individual tenants may need instant cash help for rental payments. To fill the cash gap quickly, one searches for external financial facilities. One must have a regular income and stable finances to qualify. Most renters lack a substantial credit history with authentic income, making it hard to get a loan. Here, the loan provider may require an additional guarantee.

A guarantor is a security that helps the borrower qualifies. He provides the strength of the income, bank statements and detailed credit history. A long and consistent payment history makes the person reliable as a guarantor.

However, most loan seekers believe a guarantor must be a homeowner to qualify. But it’s not. You can consider a non-homeowner guarantor to get a loan. So, if you don’t own a home or know someone who doesn’t, he may still be the guarantor.

What does a non-homeowner guarantor loan imply?

Tenant guarantor loans imply that a renter can act as a guarantor. He does not have to be a homeowner to qualify. He could be renting a property or living at home with family. It is an ideal loan for someone who cannot find a homeowner guarantor. Unlike traditional guarantor loans, the guarantor must have a good credit score.

He could be a family member, friend, roommate or colleague you trust. Additionally, consistent income with a responsible outlook towards finances may help. Additionally, you must not share a bank account or any other financial links with the person.

The loan provider conducts a brief soft credit check on both parties involved. This helps him analyse the chances of approval and the amount you may legally get.

You may get up to £15000 with a non-homeowner guarantor loan. However, you can get over £20000 with a homeowner guarantor.

You get a week’s cooling period on guarantor loans without homeowner requirements. During this period, the guarantor and the main borrower may decide whether to proceed or cancel the agreement.

What does a guarantor need to do?

When applying, the guarantor must co-sign the loan agreement. The loan provider grants sufficient time for the borrower and guarantor to analyse the terms. You can cancel within 14 days of approval or proceed with the application. Usually, it is ideal to cancel it quickly if you don’t feel right. It saves you from the costs. The guarantor must send the funds back to the lender. He would not charge a fee.

Alternatively, if you agree to the loan terms, make monthly instalments. The guarantor pays if the borrower cannot, help them avoid a missed payment. Skipping payments may negatively impact the credit score. Thus, ensure the guarantor understands the terms well before signing the agreement.

5 signs a non-homeowner guarantor loan may help you

You do not always need a non-homeowner loan for your needs. It is an ideal option for the individuals who:

1)  Lack of good credit score, income and finances

Individuals with pending debts, CCJs, defaults, and missed payments may have low credit scores. Getting quick approval on independent loans becomes challenging. Additionally, you may get one with low income but at competitive interest rates. Thus, having a guarantor with stable finances and credit score may help. It dilutes the risk for the provider. You may get a loan with a higher sum at affordable interest rates and terms. You may also negotiate the terms then.

2) Need money instantly despite poor credit score

Consider it if you need money quickly for cash emergencies like- medical needs, motorbike tyre repair/ replacement, rent payments, etc. A non-homeowner guarantor loan is easier to get than a traditional loan. The process is quick as it eliminates cumbersome asset assessment. Instead, the guarantor having regular income, and a well-running business with a good credit score may help.  Individuals struggling to finance emergencies due to low credit scores may consider it.

3) Cannot find a homeowner as a guarantor

Finding a guarantor in the same city is challenging when you live alone in a different city. It is true if you have lived there for over 6 months or more. However, the cash may fall short at times. Here, individuals with low income or no credit history may need support. You may also consider one if you lack an income source.

4)  Cannot pledge assets as security or lack one

Usually, individuals with low or no income may get a higher sum with collateral. You can pledge an asset equal to the amount requested. However, if you do not want to take the risk or lack assets, this option may help. Just analyse whether you can trust your friend or room buddy with critical financial decisions. Involving someone in the agreement requires you to be transparent about financials. Thus, choose the person carefully to benefit from the facility.

5)  Require £10000 with limited rejection possibilities

If you need over £10000 as you are unemployed or have income below £5000, a guarantor helps. He may add strength to the application by providing the best proof of affordability. The loan provider only requires a guarantee to get the money back promptly.

The guarantor’s income, consistent credit history, and accurate information may help. This creates credibility for repayments for a loan provider. A guarantor with a consistent credit history of over five years may prove helpful.

Alternatively, a borrower with a good credit history doesn’t need a guarantor. It is until his income meets the required criteria. Alternatively, a good credit score may qualify with a guarantor with a fair credit history.

How do you get a tenant guarantor loan for bad credit quickly?

Non-guarantor loans usually have flexible terms and grant peace. It is because the person you choose is someone you can trust. He could be a tenant as well. It eliminates contacting or bothering your guardians for a small amount. However, getting a loan requires you to consider a few things. This is especially true if you need guarantor loans for a bad credit score. A well-sorted loan agreement may help you achieve your financial goals. Check some aspects to consider before applying. Otherwise, choosing the wrong tenant guarantor may make you pay the dues. If you fail to, it impacts your credit score.  Here is how you can avoid it with the right choices:

1. Explore the guarantor’s financial condition

Choosing the wrong guarantor may lead to loan rejection. Avoid the hassle by checking the potential guarantors on a few parameters. Analyse their monthly earnings, expenses, bankruptcy status ( if any), joint account linkage ( bad credit), and pending debt. Individuals with poor credit history do not qualify as a guarantor. Thus, prefer one with a decent profile with timely payments and high income. He must have an authentic and verifiable income source.

2. The guarantor should approve the terms all-knowingly

You should explain the terms and risks involved to the guarantor. This will help the other person decide carefully. Moreover, being transparent about the loan purpose and the financial goal may help. He may be eager to help if the purpose seems legible.

3.  Choose the right repayment after the discussion

The guarantor and the borrower must be even on repayment terms. Discuss and plan out repayments before signing the agreement. Any tinge of confusion may hamper the loan payments and relationship. Additionally, discussing repayments will help you choose the right repayment tenure. It should be comfortable for both.

4.  Provide genuine contact and other details

Lenders require one to provide traceable details. The borrower and the guarantor must provide details like email, contact number, address proof, and ID proof that are true to their knowledge. A minor discrepancy in the same may lead to loan rejection. It may impact both the credit scores. Thus, re-check the details while filling out the application form. Provide proof of the latest and genuine income/revenue to qualify.

5.   Choose an amount favourable to both

However, you may get a higher amount with non-guarantor loans and review finances. Both the borrower and guarantor should finalise a favourable amount. It should not hamper the budget later. Check whether you, as a borrower, can pay the dues if the guarantor fails. Yes, you may do so in a lengthy loan term. But you should do everything to avoid default.

Bottom line

Getting a tenant or non-homeowner guarantor loan is ideal for individuals with low income and credit. It helps such persons get instant access to a high amount quickly. The renter can act as a guarantor on the loan. He must have a reliable financial structure with minimal debts to qualify. Additionally, choose a comfortable amount that’s approachable for both. A healthy guarantor loan agreement may boost credit score and financial standing.

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