The simple answer is, yes, you can get a loan without a guarantor. But it also depends on who you apply to and your circumstances.
Let’s take a closer look.
What are guarantor loans?
When you apply for a guarantor loan, you need someone to formally act as your guarantor for this credit. This means they must agree to take over your repayments if you are no longer able – or willing – to make them.
In practice, this means that you apply for and take out the loan in your name, and are expected to make the agreed repayments in full and on time each month. But if you stop making these repayments, for whatever reason, the lender can chase the guarantor for these funds.
They can continue to chase you for the outstanding money as well, and missing any repayments will cause damage to your credit history. But once the guarantor becomes equally liable for the repayments, their credit history is also at risk if they don’t make them.
For this reason, it’s incredibly important that the person acting as guarantor is sure that they can afford to take over your repayments in any situation where you stop making them – and is happy to do so too.
Do you always need a guarantor for a loan?
No. Guarantor loans are a specific type of loan where the lender requires you to find a guarantor in order to release the funds to you. But most loans do not require you to find a guarantor.
If you’re applying for a loan, you can choose between a secured or unsecured option. A secured, or homeowner, loan is secured to your property. This provides the lender with additional security in the event that you stop paying – just as having a guarantor does.
With an unsecured loan – also known as a personal loan – the money isn’t secured to anything you own, and you don’t have to provide a guarantor either. Because of the added risk the lender is taking in doing this, unsecured loans usually provide a smaller sum of money over a shorter period and at a higher interest rate than secured loans. But if you stop making your secured loan repayments, your home is at risk of repossession.
So, the option you choose ultimately comes down to your own circumstances and preferences.
Why choose a guarantor loan?
So, why would you choose to take out a guarantor loan rather than a regular secured or unsecured loan? Well, a guarantor loan provider may place less emphasis on your credit history when you apply.
Your credit history shows all your credit agreements and how you’ve managed them going back over the last six years or more. If you have borrowed in the past and made all your payments in full and on time as agreed each month, you’ll be rewarded with a positive credit history. This can make you eligible for the most competitive deals and products on the lending market.
But if you have been irresponsible with your borrowing and have missed payments, your credit history will be damaged. When you apply to a new lender, they will see this and it may make them think twice about lending to you.
Because a guarantor formally agrees to take over your loan repayments if you can’t pay them, the lender may be more willing to overlook a damaged credit history.
This comes at a price though. Guarantor loans often come with a far higher rate of interest attached to them than a regular personal loan for the same amount.
And as we said, you don’t have to have a guarantor to take out a loan. There are other options, including lenders who specialise in borrowers with a less-than-perfect credit history.