July 26, 2023
- Olsen Breet
- October 21, 2021
Guarantor loans are losing popularity among the borrowers because of the available options. You don’t need to find someone to get a loan if you don’t have the perfect credit history. However, a proper strategy is critical before filing the loan application to boost your chances of approval.
The online lending industry is the reason for the growing demand for long-term personal loans without a guarantor. It has made the lending process extremely simple with an online application document submission. You can still get a loan even if your profile doesn’t meet the strict eligibility of the top financial institutions such as banks.
Reasons to avoid guarantor loans
First, we must find the reason for the downfall of guarantor loans in the lending business. It was ideal for people with bad credit to get a loan with a bad credit score or limited affordability. However, the responsibility of debt repayment on the guarantor was considered unreasonable.
Many customers complained about the unnecessary communication to the guarantors over delayed payments. The misuse of power through the loan agreement caused a fear among the borrowers to ask someone to become their guarantor. Moreover, it became a reason for the relationships to end because of the default on loan.
Other reasons include the awkward conversation about financial difficulties borrowers were facing. It is never a comfortable conversation since you need to explain your shortcomings or difficulties in your personal life. And more importantly, it makes no sense to go through the trouble if you can get somewhat the same interest rates with a guarantor.
How to get a loan without a guarantor
Your credit profile, loan requirement, and lender type will determine the process to get a loan without a guarantor. Some methods may require a few months of consistent efforts to improve your profile. While others may help get instant financial support from the choice of your lender.
Here are some of the ways to get approval for a loan without a guarantor.
Pay the Existing Debts
Your debt to income ratio is a major reason for the rejection of loan applications from direct lenders. They can use the ratio to find your affordability for a new loan. Thus, it gets important to repay the existing debts to improve your profile.
Moreover, your credit score will also improve with the timely repayment of existing debts. The smaller number of active debts will make you a responsible borrower with good money management skills. However, the process is not easy if you have multiple debts and limited income to repay.
A good strategy for debt repayment will include countering the high interest or small amount debt. You can use a debt consolidation loan to save money on the overall cost and make the management simpler. Moreover, a budget is essential to repay more than required for the instalments.
Increase Your Credit Score
Your credit score is a measure of your financial responsibleness. The missed payments, frequent loan applications, and excessive use of credit will hurt your credit history. Therefore, you should avoid dependence on credit to live within your means.
It will take a few months or even years to repair the damage on your credit history. You can speed up the process with timely repayment. Also, use credit cards for small transactions as it will help create a positive credit history.
Apply for a smaller loan amount
We often add the cushion amount to the loan only to increase its overall cost. The reason for the additional principal amount is the safe approach to avoid another loan process in the future. However, your profile may allow an amount barely near your requirement.
You should always apply for a loan amount closest to your requirement. It will make the repayment easier with less interest and smaller instalments. Moreover, it will certainly increase your chances of approval if you can afford the instalments.
Contact a direct lender
Banks receive thousands of loan applications to allow them to make heavy profits from the shortlisted profiles. They will maintain a strict eligibility policy with the credit score, income, and other factors. Thus, contacting a direct lender instead of a bank makes more sense if you want a flexible process.
We are happy to provide our customers with loans if their profile meets the minimum eligibility of the FCA. Thus, it will not create the unnecessary stress of repayment to increase the chances of a default. Moreover, you will enjoy many benefits, such as flexible repayment and term extension.
You can fill the online application form to apply for loans without a guarantor. You can explain the reason for the missed payments or default in your credit history to our representative. Moreover, you can share the requirements to help us create a personalised solution for your needs.
Select loan tenure wisely
Your applied loan term will determine the instalments, risk, and overall cost of the loan. The lenders will check your profile, keeping in mind the risk for the defaults. Moreover, the shorter and longer durations will have significant differences in terms of affordability, overall cost, and impact on your financial condition.
The long-term loans will come with an increased risk to the lenders. You may face more financial troubles in the future, or the previous habits may return to a budget failure. However, you will receive manageable instalments to increase the affordability of the same loan.
Short-term loans will increase the repayment stress with heavy instalments. The lenders feel more comfortable because the chances of repayment are higher. Moreover, you will be able to repay the loan early to save money on the overall cost.
Start a Side Hustle
You can also start a side hustle to increase the income in addition to your regular job. Thus, the affordability will increase to make the repayment easier for your budget. Moreover, the lenders will find it easier to trust you with the money since the debt-to-income ratio will decrease.
The opportunities for side hustles are endless in the current environment with remote collaboration. You can offer your services as a freelancer by using your creative or technical skills. Create a profile on popular freelancing platforms to meet clients from different parts of the world.
Other opportunities will include using the eCommerce platforms to sell products online. You can also offer certain services to people that will make their life easier. People are willing to pay others for standing in a queue for them.
Try other loan types
Personal loans are very popular since they help with more purposes than the other loan types. You will find many loan types to suit your requirements. Their eligibility is also different to serve a diverse audience.
Therefore, you should check the different loan types before filling the application form for one. Some might even suggest a secure loan to increase the chances of approval or get better interest rates. However, it will make no sense to put an asset at risk if a certain loan fulfils your requirements without security.
Maintain a Good Account Balance
Lenders will ask for the account statement to check the spending habits, total income, and average balance in your account. The statement will support your other documents to give assurance of your repayment capacity. Therefore, it is essential to maintain a good account balance for at least 3 to 6 months.
There is no fixed amount as it will differ for your profile and loan amount. Also, the lenders have a different standard that may not remain the same for every offer. Nevertheless, you should try to keep enough balance in your account to manage the living costs, including the instalments for a few months.
To sum up, you should avoid the guarantor loan since it is an unnecessary risk for your relationship with the guarantor. You can still get loan approval for your profile if you make the right choices. Moreover, a slight reduction in the interest rate is not worth the trouble for a guarantor loan.
Olsen Breet is our in-house Financial Expert at EasyPolicyLoans, with more than a decade of writing for various finance companies in the UK. He has got this knack for turning even the trickiest money matters into something we can get our heads around. Before he started sharing his wisdom here, Olsen was playing with big numbers and advising on loans at a bank. He graduated from University of Glasgow, grabbing a finance degree before jumping into the deep end of the financial pool. Olsen’s our go-to guy for making sense of market trends and is always ahead of the curve.