What AreTenant and Guarantor Loans for Non-Homeowners?

What AreTenant and Guarantor Loans for Non-Homeowners?

If you rent or don’t own your own home, it is still possible to get a loan if you need access to money or you are looking to improve your credit score.

And if you choose a guarantor to support your loan application the guarantor doesn’t always have to be a homeowner either.

Each loan company will have its own set of rules and will follow stringent criteria to ensure that those parties involved meet the affordability criteria.

All loan types are either secured or unsecured. Tenant loans are unsecured loans meaning no collateral is required to be successful in your application. The flipside of an unsecured loan is that the creditor will require extra insurance that you’ll pay the loan back. This typically comes in the form of higher interest rates.

Essentially, for offering a higher risk loan the creditor charges more to mitigate the risk.

Guarantor Loans

A guarantor loan isn’t secured against a property. However, some companies insist on a guarantor being a homeowner if a requested loan amount is above a certain level.

A guarantor is someone who agrees to cover the debt in the event that you can’t. Becoming a guarantor is an important decision. You are responsible for the entire loan until it is repaid.

You apply and your nominated person guarantees the loan in the event that you are unable to make a payment.

If a non-homeowner wants to act as guarantor then it may mean even higher APR rates for the borrower. On top of that if the borrower defaults the guarantor would then be responsible for these higher rates of repayment.

It’s always worth considering all your options before taking out a loan or offering to be a guarantor. Both are major financial commitments with implications for your finances and credit rating if you can’t make a repayment.

Tenant Loans

If you rent, your options include guarantor loans and also tenant loans – also known as non-homeowner loans.

Each lender has its own criteria, but it is possible to get a loan if you are not a homeowner, if you live with family or friends, or if you have a guarantor in the same position.

If you can’t get a secured loan (and therefore access to the cheaper interest rates) tenant loans offer a simple solution. Instead, the decision about whether or not to lend is made using other criteria including.

  • Credit history
  • Your income
  • General affordability criteria

The Changing Market

As more and more people turn to renting the personal finance market has adapted. The model that younger people are first time homeowners and can use homes as security is no longer the case. There as many younger renters as there are those between the ages of 35 and 54. The age of first time buyers is at an all time high. Now the average age is 35 for a person buying their first property.

The idea of personal loans being secured against property is no longer such a viable reality.

Final Thoughts

The good news is that if you have a poor credit score, or you have a thin credit score (where you haven’t been able to build up a good enough credit history) there are lots of options that allow you access to loans.

And, as mentioned, there’s also the option of using a guarantor to help insure against the risks. Today there are companies that will lend if the borrower is a non-homeowner and the guarantor is a non-homeowner too.

Remember though that the lender will mitigate the risk by increasing the interest rate.

But, if you are a non-homeowner, and you need to borrow, don’t despair. All is not lost, but definitely do your research first and explore all the possibilities that are open to you.