How to Borrow Money as a Tenant?
Your credit score is pivotal to your loan application. While it’s not the only component of your overall financial statement that lenders assess, it is key to their lending decision. Your credit rating is a reflection of how responsibly you’ve used credit in the past. So, if you have a below-average credit score, you may find it challenging to qualify for competitive rates.
However, if you’re a tenant in a financial crisis with minimal income, your options may be limited to unsecured credit. In such cases, your lender might ask you to get a guarantor to co-sign your loan. A guarantor is a close friend or family member who partakes in the loan’s obligations with you.
But what if your guarantor is a tenant too? Can you still qualify for a loan? Read on to find out.
Personal loans for tenants: can I qualify?
Personal loans for tenants or simply tenant loans are a form of unsecured credit for tenants and non-homeowners. You can apply for a tenant loan even if you’re self-employed. However, you may need a year’s audited accounts to prove that you have a suitable income for the loan amount you’re looking to borrow. Unlike secured loans, you don’t have to declare collateral to secure these loans.
The interest rates for tenant loans are slightly higher than that of secured loans because there’s no collateral attached to these loans. Just how high these rates get depends on your financial standing – especially the credit score. Your credit score is a record of your creditworthiness, and your income reflects your affordability. If you apply for a personal loan with a less than stellar credit score, the chances of you qualifying for lower interest rates are narrow. Thus, it may be worth improving your credit score before applying for a loan.
Can I borrow a tenant guarantor loan instead?
An ideal guarantor should have a stellar credit rating, sufficient income, and preferably be a homeowner. There several reasons as to why lenders prefer homeowner guarantors to tenant guarantors; some are listed below:
Although, guarantors are required to have a strong credit history and a stable income. Clearing your credit card balances on time or paying off household bills can build your credit score. So, if you’re planning on becoming a guarantor, consider working on your credit score to strengthen your application before signing up. Typically, you can apply for a guarantor loan in the following circumstances:
- Tenancy with Verbal Agreement
- Paying Guests
- Regulated Tenancy
- Tenancy with Written Agreement
- Students living on Rent
- Company-offered Tenancy
- Living on Joint Tenancy Agreement
- Short-term Tenancy
- Living on Excluded Tenancy
Are tenant loans instant decision?
The time that the decision-making process takes varies among different lenders. Once a lender approves your loan, the paperwork process begins. After you complete the formalities, the lender will usually disburse the money into your bank account. You can use the funds at your discretion as soon as this transaction is complete.
How to apply for a tenant guarantor loan online?
Applying for a tenant loan online is a pretty straightforward process. All you need is a device, an internet connection and some documents. Here’s how to apply for a tenant guarantor loan online:
- Register yourself on the electoral roll: Enrol yourself on the electoral roll to boost your chances of qualifying for a loan.
- Provide proof of income: A proof of income shows your ability to repay the loan to the lender.
- Beware of mistakes on your credit report: Pull out a copy of your credit report and thoroughly analyse it before applying for credit. If you find an error, get it rectified as soon as possible. Discrepancies can reduce your credit score. Besides, a fraudulent entry may indicate identity theft.
- Know what you’re getting into: Some lenders deem it obligatory for a guarantor to go to a financial advisor to understand the implications of signing up as a guarantor. If you’re planning to guarantee a close friend’s loan, you should be fully aware of the consequences of default at their end. Contemplate the repercussions before taking the final call.
- Guarantor information: The lender will require the personal and financial details of your guarantor. Ensure that you provide accurate data.
What can I use a tenant guarantor loan for?
You can use the funds from a tenant guarantor loan at your discretion. Since a co-signer is involved in the loan, you should use the money very responsibly. Typically, you can use a tenant guarantor loan to:
- Consolidate more expensive debt.
- Cover emergency medical expenses.
- Regulate household cashflow.
- Pay for car repair.
Conclusion
Tenant guarantor loans and tenant loans give tenants access to financial aid. Tenants either need a stellar credit history and a solid financial standing themselves or a guarantor who fulfils these criteria.
Therefore, it is best to borrow an amount that you can genuinely afford. Overstretching yourself may not benefit you in the long run.