Non Homeowner Guarantor Loans – Complete Breakdown with Loopholes, Guide, FAQs & More

If your bad or non-existent credit history is preventing you from obtaining a loan, then you could turn towards guarantor loans to fund whatever purchases you may have.

In the past, it was necessary for the guarantor in a guarantor loan to be a homeowner but in recent times, with increasing competition, it’s no longer a necessity. 

Today, I’ll be looking at non-homeowner guarantor loans and whether or not they could be a prudent option for you to obtain a loan for yourself

What is a Non-Homeowner Guarantor Loan? 

A non-homeowner guarantor loan (sometimes called a tenant guarantor loan) is a loan that does not have the requirement which states that the guarantor has to be a homeowner. 

A homeowner is defined as both a person who owns their home outright or even a person who has a mortgage on their home. 

Lenders who offer non-homeowner guarantor loans ignore the fact that your guarantor does not own their home. Instead, they focus on your guarantor’s credit history, their income, expenditure and their overall capability to make repayments on your behalf. 

As long as the guarantor you provide for your loan application is financially stable, has a decent credit score and is able to prove that they will be able to make repayments on time and in full, it won’t matter if they don’t own a home.

What Are Some Things I Should be Aware of When Considering a Non-Homeowner Guarantor Loan? 

The number one thing you should be thinking about when considering this is the interest rate. 

Tenant guarantor loans will have much higher interest rates compared to a guarantor loan you would’ve gotten if your guarantor owned their home. 

It’s important that you assess and compare tenant guarantor loans with homeowner guarantor loans to ensure whether going for the former would be worth it for you or not. 

It’s definitely great that guarantor loans for non-homeowners are available now considering the fact that they didn’t even exist in the past.

They enable individuals that don’t have any close friends or family members that own a home to obtain loans.

However, just because it is an option does not mean you should always go for it. 

It could be worthwhile for you to look for a friend or a family member who does actually own their home so that you could find a better interest rate for yourself.

If your guarantor is a tenant or even if they’re living with their parents, it won’t matter as long as they can prove that they are financially stable and have a good credit score.

non home owner guarantor loans

What Are Some Things I Should Look for when Searching for a Tenant Guarantor Loan?

There are definitely some key features you should be looking at when comparing different lenders. Some of these features are: 

  • The eligibility criteria. The very first thing you should be looking at is whether you qualify to obtain credit from a certain lender or not. Always be mindful of the fact that it’s not just you who has to fulfil the borrower requirements, but your guarantor has to fulfil the guarantor requirements as well. Never waste time applying to a lender whose criteria you don’t meet. Not only will it be a waste of time and effort but it may also bring you and your guarantor’s credit score down.
  • Will you be able to borrow the amount of money you need? With these loans, it’s possible that the amount you’re offered may not be very high. Thus, it’s important to ensure that you will be able to secure the amount of money you need before applying to any lender. 
  • The interest rate. As I mentioned earlier, tenant guarantor loans can have extremely high interest rates even if your guarantor has a good credit score. If you don’t want to pay too much money in the form of interest, then you may want to consider looking for a guarantor who owns a home and applying for a traditional loan with a guarantor.
  • Will I be able to pay off the loan early at some point in the future? This is definitely something worth thinking about. Most lenders do not charge you extra for early repayment of your loan. Paying off your loan early can definitely save you a lot of money that you, otherwise, would have been paying in the form of interest. 
  • What does the repayment duration look like? Deciding the repayment duration can be extremely tricky. This is because you want them to span a longer time so that your monthly repayments are lower. However, if they span too long of a time period, then you will end up paying a fortune in interest. It’s important to strike a balance between affordable monthly repayments and how much you pay in interest overall when determining the duration. 
  • Are there any hidden charges or fees? Most lenders don’t charge additional money when it comes to these loans but it’s definitely important that you ask them about this when you’re about to borrow money. 
  • Make sure they are registered in England, Wales or Northern Ireland. 
  • Make sure that they are authorised and regulated by the Financial Conduct Authority (FCA). 

The last point is important because loan sharks exist who operate illegally and are not authorised and regulated by the Financial Conduct Authority. This means that they are not regulated and can charge you any rate of interest they want.  

They prey on individuals that have bad credit scores who can’t get approved by traditional lenders. 

They can also treat you unfairly such as by threatening you with violence if you can’t afford your repayments. Steer clear of such illegal lenders at all costs. 

What are some Basic Criteria for the Borrower and Guarantor to be Eligible for Tenant Guarantor Loans? 

These can vary depending on the lender but some basic requirements that all of them have are the following: 

Requirements for the Borrower

  • Must be between the age of 18 and 75. 
  • Should have a source of income. This could be in the form of employment, self-employment or by being a pensioner. 
  • Must be a resident of the UK.
  • Must hold a bank account in the UK.
  • Must be able to prove their financial circumstances which will show they can afford the monthly repayments for the loan they are opting for. 

Requirements for the Guarantor

  • Must be between the age of 18 and 75 (Some lenders have a minimum age of 21 for the guarantor). 
  • Have to provide proof of their financial circumstances which will prove they can afford the repayments if the borrower fails to make them.
  • Must be a resident of the UK.
  • Must hold a bank account in the UK.
  • Must be able to state that they understand the responsibilities they are undertaking and are comfortable with them. 

Conclusion

Non-homeowner guarantor loans are definitely an option present to you to borrow money if you need it but don’t have good credit. 

They do come with a lot of risks and disadvantages which is why I say that you must thoroughly assess them and take them into account before you borrow money using such a loan.


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