What If I Cannot Get A Guarantor?
There can be times in life when you are applying for a loan, or possibly looking to let a place to live, and the bank/lender or the landlord requires you to have a guarantor.
If you are applying for a guarantor loan, not being able to get a guarantor is going to pose a problem. The reason for this is that guarantor loans are based on two main factors:
* Affordability: You having a source of income and showing you can afford to repay the loan.
* A guarantor: Someone you know who is guaranteeing the loan, and in essence stating if you failed to pay a payment, they would pay the payment.
So not having a guarantor for a guarantor loan, presents a problem.
If you say you cannot find a guarantor or cannot get one, you may want to ask yourself a few questions, such as who do I know:
* Work colleagues
All of these can be a guarantor, and they do not necessarily have to be homeowners. They can be tenants as well.
They just need good credit, and to know you, and not be financially linked to you already.
But let’s say you have tried to find someone to be your guarantor, and you simply cannot find anyone, what then?
We need to look at what it is that is requiring you to need a guarantor in order to get approved for a loan. It would not be affordability, as if a lender feels you cannot afford to repay a loan, having a guarantor does not suddenly make the loan more affordable.
If you had a spouse or partner and affordability appeared to be an issue, the lender may request your spouse or partner, if they are also working, be a co-signer on the loan.
Two borrowers, both with an income makes the affordability ratios better.
The main reason a lender will require a guarantor is that the main borrower may have have bad credit in the past, or possibly no credit.
No Credit: Establishing a credit history if you have no credit is not too difficult. There are credit building accounts and credit cards offered with low credit limits, to allow one to establish themselves in the world of credit.
Credit building accounts are a good start to getting credit, as well as having a current account, and a savings account.
Bad Credit: Having bad or poor credit is another reason why a lender may require a guarantor for a loan to be approved.
The first thing to do is to get a copy of your credit history so you can see what is being reported, if there are any errors or omissions, you can get this corrected.
If you have open CCJ’s, or unpaid accounts in collections, these need to be paid and satisfied to help your credit score.
Getting on the electoral role will help with your credit score as well.
There are more tips to increase or raise your credit score here.
Landlords Requiring a Guarantor
When you go to let a place to live, most private landlords require a deposit, which is usually made up of first and last month’s rent, or in some instances six (6) weeks rent as some landlords break down the rent into a weekly figure.
There also can be numerous other fees that Estate Agents and landlords charge when letting a flat or house.
Fortunately, many of these fees are being banned as of this June with the new Tenancy Fees Act.
I you are attempting to let a place for the first time, meaning you have no history of paying rent, some landlords will require a guarantor, someone to guarantee the rent, should you not pay the rent.
Landlords requiring a guarantor is nothing new, but again, what can you do if you cannot find a guarantor?
Increase Your Deposit: While it may be difficult to save for, offering to increase your deposit, or paying three (3) or more months rent in advance can be an option. Some landlords will accept this.
References: If you have a rental history, getting a reference from your previous landlord, stating you have paid your rent as agreed, and you were a model tenant, is another option.
Insurance Schemes: There are some insurance schemes where as a tenant you pay an upfront fee for an insurance policy, that protects the landlord against any damages and loss of rent. In some instances the landlord may suggest this option.
Find a Different Place: If you cannot get a guarantor, and the landlord is adamant you have a guarantor, then you may need to move on, literally, and find a different place to live and a different landlord.
Obviously, if you can find a guarantor for a loan or a place to live, if a guarantor is required, is the easiest route, but there are other options.