When you want a mortgage, your lender will check your credit score and will usually require a co-signer or guarantor. Unfortunately, things are not that straightforward when it comes to getting a loan without a guarantor.
If you have bad or no credit, or if you don’t want to involve anyone else in your loan application process, it can be difficult to get approval for a loan without a guarantor. This is more true if you live in an area where lenders are cautious about extending loans without a guarantor.
Consequently, the first thing you should do before applying for a no guarantor loan checks whether any lenders in your area are willing to provide this type of loan. If not, there might be other options worth exploring, such as getting help from friends or family members who have good credit and could act as your guarantor instead.
Read on to learn more about no guarantor loans.
What is a no guarantor loan?
A no guarantor loan is a mortgage for which you are not required to have a co-signer or guarantor.
You can also call it an alternate financing loan or unguaranteed mortgage. The main difference between a no guarantor loan and a regular mortgage is that you will have to go through a much more extensive application process.
Some online lenders that offer no guarantor loans in Ireland are Amigo and Microfinance Ireland.
This is because a regular mortgage is simpler to process. After all, it is pooled with other similar loans, while a no guarantor mortgage is considered riskier because there is no one else to act as a backup.
Because there is more risk involved in a no-guarantor mortgage, you should expect to pay a higher interest rate.
Why do you need a guarantor for a mortgage?
To understand why you need a guarantor for a mortgage, you should first know a little more about credit scores. Credit scores are the main metric used to assess your financial health, and if your credit score is low, you might have a hard time getting approved for a loan.
Therefore, when you apply for a mortgage, your lender will likely request that you provide a co-signer or guarantor to protect their investment in case you default on the loan. When you have a co-signer, this means your credit score is not considered. The lender only looks at the credit history of the co-signer.
This is why having a good guarantor will make the application process much easier for you, even if you have a low credit score.
What happens if I have a guarantor but I am denied?
If your application is denied, you must take the time to understand why. It could be that the lender has decided not to extend you a loan based on their criteria.
It could also be that the lender has decided not to approve you because they are unhappy with your guarantor. If this may is the case, then you must work with the lender to resolve this issue.
The best way to do this is by contacting them directly and asking them what criteria they used in evaluating your application. Then, ask them how they would feel about having another person co-sign for you.
In some instances, lenders will accept applications from those who have a guarantor who also has a good credit score. This means that even though your guarantor does not have a good credit score themselves, they can still help you obtain approval for a no guarantor loan if they are willing to accept the risk of being responsible for repaying the loan if something goes wrong.
Which lenders offer no guarantor loans?
The lender you choose will have a significant bearing on your chances of obtaining a no-guarantor loan. For example, credit unions are known to be more flexible about approving no guarantor loans.
This is because they are not profit-driven like banks, and they can be more willing to take a risk with an unsecured loan. In addition, loan brokers are known to facilitate the application process for no guarantor loans.
Therefore, if you want to apply for a loan without a guarantor, look for a broker who specializes in unsecured loans. As you can see, the type of lender you choose can have a significant impact on your chances of obtaining a no-guarantor loan. Therefore, it is important to shop around.
Maybe you know someone with a good credit score who could act as a co-signer. This can be a great alternative to getting a no-guarantor loan. You can also call it a joint mortgage. A co-signer loan is essentially a regular mortgage, but the lender will look at your credit score and the credit score of your co-signer.
Based on the lower credit score of one of the two, the lender will determine the interest rate. Therefore, you should be careful when choosing a co-signer and make sure that the person you choose will be willing to co-sign for you.
Another option is to get a mortgage guarantor. A mortgage guarantor is a third party who promises to pay the loan if you do not. Having to find the right guarantor and make sure they are reliable can be a difficult task.
Other options if you need no guarantor loan
If you do not know anyone who could act as a co-signer, you can still try to get a no-guarantor loan by increasing your down payment.
For example, if you want a $200,000 loan, you can try increasing your down payment to 20% from 10% to get a no-guarantor loan for $240,000 instead. If you have enough savings for a 20% down payment, you might have better chances of obtaining a no guarantor loan.
Another option is to look for a different type of lender. This might not be easy, but it is worth trying if the other options do not work out for you.
You can also look for a different type of loan, but this might be more difficult. You shouldn’t give up on getting a no guarantor loan, though. There are many options available to you, and you can always try again once you have made a few more attempts.
Conclusion On No Guarantor Loan
A no guarantor loan is an alternative to getting a personal guarantor. With this type of loan, the lender does not require that you have a guarantor, but it is good to have one anyway.
A no guarantor loan can be difficult to obtain, especially if you have less-than-average credit. However, you should know that it is not impossible. The first thing to do is to look at whether any lenders in your area even offer no guarantor loans. If so, you can proceed with the application process by increasing your down payment and improving your credit score. If not, it is worth trying to find friends or family members who could co-sign for you. That way, you will have a backup plan in case the lender rejects your application.