• October 21, 2020
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How to Borrow without a Guarantor despite a Bad Credit Rating

A credit score is a key determinant to approve a loan application. If your credit report is not up to par, you will get a loan at a high-interest rate. However, there are some people who want to borrow money but they do not have a credit history. This is the case when you are applying for a loan the first time.

Since your lender has no base to believe the fact that you will repay the debt on time, you end up with a high-interest rate like in the case of bad credit borrowers. Under such circumstances, the lender may require you to arrange a guarantor with a good credit rating. This is because it mitigates the risk on the lender’s part.

Of course, a lender will hesitate to lend you money when you have a bad credit rating and the nature of the loan is unsecured. This is why a lender will require you to arrange a guarantor with a good credit history. However, it is not possible all the time.

Now the question is how you can get an approval for the loan without a guarantor. You may think that you are fantasizing about getting a big loan approved without a guarantor, but you can get money if you meet other conditions.

You show sufficient income

Regardless of the size of the loan,. a lender will look over your affordability. If you cannot prove your repayment capacity, you will not get money no matter how good your credit history is.

If you are a first-time borrower or your credit rating is abysmal, you can still get loans without guarantor from direct lenders by proving that you can easily repay the debt on time. I

f you cannot arrange a guarantor due to any reason, your income should be high enough to prove your affordability to your lender. A higher-income improves the chances of approval despite a less-than-perfect credit score.

Small amount

You all know that no guarantor loans are aimed at funding unforeseen expenses and therefore the size of these loans is not very big. Lenders generally lend as much amount as £2,500.

Make sure that you are not borrowing more than that. However, there are some lenders that can lend you money more than this, but it does not mean they will not look over your income statement and needs.

Borrowing a small amount is always a better way to convince your lender to sign off on the loan even if you have a bad credit rating.

You have been making recent payments on time

Hard inquiries will show up on your credit file for six years. It means once you have fallen behind repayments, your credit score will go down.

Of course, your lender will make a decision after taking into account your credit rating, but they will also look at your current repayment ways, for instance, whether you have been making your credit card bills and utility bills on time or not.

To make a good decision, it is crucial to look over recent repayments because your bad credit rating can be the result of default occurred one year ago, and ever since you have been making all payments on time.  

Borrowing only for the right purpose

Do not forget that lenders ask the reason to borrow money although it is not necessary but sometimes it can be a part of the process. Regardless of the amount you are borrowing, make sure that you have the right reason to do so.

No guarantor loans are small loans aimed at funding unforeseen expenses, for instance, a medical treatment.

If you have come up with an emergency and your savings have fallen short of cash, you can take out for these loans, but you should avoid borrowing money to fund your regular expenses.

For instance, if you have lost your job, you should try to cut down on your expenses and dip into savings to make ends meet. Likewise, these loans are not an ideal option just because you want to buy a new mobile phone.

You can borrow money without a guarantor even if your credit rating is not perfect if you have a high income, have been making recent payments on time, and are borrowing a small amount of money.

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