Tenant loans apply to those who aren’t a homeowner, such as those renting or living at home. They can sometimes be more difficult to secure compared to homeowner loans as applicants don’t have assumed financial responsibility.
Tenant loans can be included as the borrower or as a guarantor for someone else. They can often be used for education, a car, home improvement or debt consolidation.
Tenant loans, due to the options on offer, can range in APR and interest rates, so it is best to research before applying. Consider your financial position and ability to repay the loan each month.
A tenant loan, much like a standard loan, can apply to you in various scenarios and situations. For the majority of applicants renting or living at home, you are a tenant loan applicant. Other loan options apply if you are a financial guarantor for someone else.
The criteria for borrowing money varies from lender to lender. An easy way of seeing how your application could be viewed is through a credit check.
If you are a tenant, there are some instances when this type of loan will apply, depending on what you are using the funds for. Examples include:
Another situation where tenant loans will apply to you is if you are acting as a guarantor for a family member, friend or colleague. Some lenders allow tenants to act as a guarantor – a financial partner – on a borrower’s loan.
In this situation, you would agree to make any monthly repayments if the borrower is unable to do so. This would require you to be financially secure and trusting of the borrower to meet the payments.
You will likely be subject to a credit check if you are interested in becoming a guarantor.
Much like a homeowner, most loan options are available to you as a tenant, though it is important to consider affordability.
The options that may be available to you include guarantor loans, personal loans, payday loans and secured loans. Of those, a personal loan may be most difficult to get approval for. Many are dependent on good credit or home ownership.
Payday loans provide a short-term finance option, making them popular among borrowers. However, these loans can come with a very high APR. That could lead to large monthly repayments.
Secured loans demand an asset, such as a car, to be used as collateral for finance to be granted. However, failure to make your monthly payments will lead to losing your asset.
Guarantor loans are popular among applicants with poor credit. They require a financial partner to meet any repayments you can’t. It is a form of a loan based on your relationships.
It is essential to apply for loans that you’re expected to be approved for. Most applications with high street banks, in particular, record a hard search on your credit history which could lower your rating.
Some tenant loans can come with high interest rates, but could provide you with an opportunity to improve your credit rating.
If you’re financially reliable and make your monthly repayments on time and in full, you should increase your credit score. This responsible behaviour can help improve your financial future.
Creating a monthly budget is a great way to keep up with your payments. Budgeting includes avoiding adding new debt through excessive spending. This would harm your credit score through increased owed credit and could also add extra debt to other accounts.
If monthly repayment costs are a concern, speak to your lender as soon as possible to discuss alternatives.
As your credit rating isn’t fixed or set in stone, your financial attitude can shape it. Therefore, knowing how and when to repay your loan helps gives you control over your financial future.