How do you land yourself a loan without a home? Our guide to non-homeowner loans has all the information you need!
When you’re looking to borrow money, there’s so many choices and lenders out there that it’s hard to know which one to go for. However, most lenders may require you to be a homeowner, before approving you for a loan. Whilst that might have been fine 30 odd years ago, it’s no longer the case… Not everyone can afford to be a homeowner and many of us spend most of our lives renting. So, why should that exclude us from borrowing money? You may need a loan for a car or even just to consolidate other debt you may have. You shouldn’t have to suffer because you’re not amongst the homeowner crowd. Whilst it may seem the odds are stacked against you, there are loans out there available for non-homeowners, you only need to know where to look.
In this guide, we’ll be delving into everything you need to know about non-homeowner loans. We’ll cover everything from loans with a guarantor, to the difference between secure and unsecure loans. You’ll find some of the best options available to you, with good credit and bad, to find the best deal and land yourself a loan. This is your ultimate guide to non-homeowner loans…
Secure or Unsecure
When it comes to looking for a loan, it’s essential to understand the basics. See, loans come in two different forms. Every single loan falls into two categories – secure and unsecure. However, it’s imperative to understand what these both mean for your money…
Secure – A secure loan is a lending form that asks you to put up property or possessions up against the loan. This could your house, car or any other valuables that you may have. Why do lenders do this? Well, it’s a way of ensuring that should you stop repayments on the loan, they’re going to get their money back. Yes, that means repossessing your home or possessions in order to cover any missed payments on your loan. These kinds of loans are considered high risk, especially for homeowners. You don’t want to find yourself missing repayments and then wind up with nowhere to live. Of course, this is in the extreme cases where repayments have ceased for a while. Usually borrowers will have a few notices before this drastic action is taken. One secure loan type is a mortgage. When you apply for a mortgage you put down a deposit, then borrow the money to buy your house. Whilst you may own the property, the bank or lender can reclaim it should you fail to pay back any money owed, not an ideal way of lending… However, secured loans are usually for much larger amounts.
Unsecure – As for unsecure loans, they’re essentially the opposite. You won’t have to put up your property or possessions as collateral for the loan. Typically, unsecure loans are for smaller amounts, therefore drastic measures aren’t usually taken. But always read all the small print that comes with your loan. Unsecure loan types range from personal loans, guarantor loans and even payday loans, but we’ll get to that. Borrowing an unsecure loan is one way a non-homeowner can land themselves a loan. Typical loan amounts for personal loans range from £100 to around £15,000 – however, prices vary for each loan type. If you can, it’s probably safer (and smarter) to aim for an unsecure loan. When you become a homeowner, unsecure loans are still the way forward – you don’t want your new home taken away from you, do you? Always think carefully before borrowing money, be it a secure or unsecure loan.
Why homeowner loans?
As we’ve mentioned, homeowner loans are secure loans, meaning they’re usually for larger amounts. You’ll find that homeowner loans will require you to put up your property as collateral against the loan. Homeowner loan amounts usually range between £15,000 and £100,000 but are repaid over a much longer period (between 5 to 25 years) – loan amounts and repayment periods vary between lenders. Normally, homeowner loan lenders aren’t that picky with their applicants when it comes to credit scores. See, even if your credit isn’t great, your house is still secured against the loan – meaning if you miss repayments, they’re going to get their money back, by repossessing your home. But, the worse your credit score, the worse your loan rate will be. This means higher APRs and paying back a lot more than you borrowed. However, we’re not here to talk about homeowner loans… You’re here to learn about non-homeowner loans!
If you’re renting, and need a loan, non-homeowner loans are designed to give you the boost of cash you need. Being unsecure loans, you won’t need anything as collateral for your loan. No house, no car… But, what are the different types of non-homeowner loans available? By non-homeowner loans, we mean any type of loan that does not require you to put up your house, or possessions, as collateral against the loan. We’ll cover some different loan types, that are unsecure, ranging from payday loans to personal loans (from banks and high street lenders).
Payday Loans – These types of loans are for small amounts of money, usually between £100 – £1,000. They’re available over a short term and have interest rates that increase greatly if the loan is not repaid in time. The idea behind payday loans is to give customers a little boost of cash when they’re struggling between paydays. So, if you’ve had some big bills, and have no money for the rest of the month, payday loans can hold you over. But, their APRs are sometimes as high as 1000% (or even higher). They’ll continue to increase over the year, if the loan is not repaid within a month of borrowing. They’re very risky forms of borrowing money and very costly too.
Guarantor Loans – Loans with a guarantor are another unsecure loan, which do not require you to be a homeowner. When borrowing money, via a guarantor loan, you’ll need to have a guarantor to support your application. See, guarantor loans are best suited to those with bad credit, however this means the lenders need to be assured that you will repay the loan (without claiming your possessions). So, you’ll have a guarantor to sign the application to state that should you fail to meet the repayments, they will be contacted to pay (however, this is a last resort for many lending companies).
A guarantor can be a friend or family member, your boss or even a landlord. But, they’ll need to be between the ages of 18 – 78, have good credit and be a UK homeowner. Typically, guarantor loan rates are between 29.9% and 69.9%, but it depends on the loan amount and repayment period. Loan amounts for guarantor loans are usually between £1,000 and £15,000. It’s common knowledge in the finance world that if you’ve got bad credit, a guarantor loan is probably the fairest rate you’ll receive for larger amounts.
Personal Loans – Although a guarantor loan is a type of personal loan, some lenders will not give you a great rate on a loan if you’re credit isn’t great. Personal loans are usually for amounts between £1,000 and £15,000 too (but can sometimes be more). The best rates are usually available for amounts between £7,500 and £15,000, with the average rate being around 2.8%. However, APRs vary from lender to lender, depending on the loan amount and the period the loan is borrowed over. As we’ve mentioned, the best rates are open to those with good credit. So, if you’ve got good credit, excellent! You’ll be getting a fair rate on a loan. However, if you’re credit isn’t great, you may be better off using loans with a guarantor.
Is Borrowing Always Best?
Whilst borrowing money may seem like an ideal thing to do, there are always factors to consider before doing so. Using an unsecure loan may be ideal, but if you cannot afford to repay the loan, you could end up with serious money problems. Some loans, like bad credit guarantor loans can be costly, with a representative APR of 49.9%, they can wind up with some large monthly repayments. Always see if you can afford to borrow a large amount of money before taking out a loan. Sometimes, credit cards can end up being cheaper than a loan. Once you know what sort of rates you can get on a loan, dependent on your credit score, it may be ideal to look at credit card rates. Some credit cards have significantly lower APRs then loans. Most credit cards usually allow a limit of up to £5,000, sometimes more, dependent on the bank. Your APR is usually based on your credit rating, which means if your credit isn’t good, you could have a higher APR than others.
Borrowing more, costs less
In some cases of borrowing money, you may get a better interest rate if you borrow more money. Whilst that may not make much sense, we’re talking about the cost of interest you’d pay on a loan. With non-homeowner loans, taking out a larger amount over a set period could see the loan interest being considerably lower than a smaller amount. It all depends on how much you want to end up paying back, although you’ll be paying back more, the amount you’re actually paying to the lender may be significantly lower.
So, if you’re looking to borrow money but don’t have a home to lend against, unsecured loans may be for you! You’ll be able to borrow larger amounts with a guarantor loan (for bad credit) or a personal loan (for good credit), whilst being a non-homeowner too. It’s important to do your homework, to find the best interest rates around. Make sure you can afford the amount you take out. Paying off a loan is an investment, if you can’t afford the repayments, don’t take out the loan! A personal loan (and guarantor loan) is a personal loan, meaning it can be used for almost anything – as long as it’s legal. The ideal loans for non-homeowners, no matter your credit history.