Under “normal” circumstances for secured loans, bad credit with no guarantor is a triage for disaster.
It is asking a credit firm to disregard the safety checks they have in place to safeguard their business.
The secured part of the loan title means that the credit firm needs something from the applicant to secure the loan against.
It is a requirement because without that security, there is no guarantee that the creditor will be repaid, and if they aren’t, they have no recourse to recover their money.
It’s a huge risk, but more importantly, there are a few workarounds to the problem.
The Secured Element of Finance
The problem with getting a secured loan is the security element. You need to have something of high value to put up as collateral. This is usually your home.
However, secured loans can be secured on anything of value that is owned by the applicant.
It may be investments held in trust that can be proven with bond certificates to access Secured Savings Loans. Logbook loans though will not do any good because chances are, your vehicle isn’t worth the amount you need – between £25,000 and £75,000.
Under £25,000 you won’t need security as you could get an Unsecured Loan. Loans above £25,000 to a maximum of £75,000 must be secured.
When you don’t have anything worth between those amounts, creditors can and usually do ask for a guarantor.
A Problem Shared is a Problem Doubled
Guarantors are not easy to obtain and it is something Jubilee Secured Loans do not require. Asides from the “it’s not fair” part, there is a high likelihood that no matter who you know, they will resist becoming a guarantor for any amount, let alone debts worth thousands, which is perfectly understandable.
And not everyone will be a suitable guarantor anyway. Most creditors who accept guarantors stipulate that they either:
- Must be a homeowner – and in that case, they will want to know about the equity in the home because if things don’t go to plan and you fail to repay, it’s the guarantor they will chase for payment and if it goes ignored, they will seek to secure the loan amount against the property to get repaid what their owed. Some firms will immediately chase the guarantor knowing they have a better chance of the responsible lender repaying than the original applicant with the poor credit history.
- Must be a tenant with a good credit history – In the case of tenants; impeccable is more like what a creditor wants the credit report to be. Nothing adverse of any kind, a track record of responsible money management, i.e. borrowing within their means.
For applicants, they need to find a person who either owns their home, or is a mortgage holder or someone who has never had a financial hiccup within the last six-years that would show on his or her credit report.
And it’s not clever either:
The Citizens Advice reported last year that since the FCA placed a cap on payday loans, debt associated problems with them decreased by 53%. However:
“The number of people who sought Citizens Advice’s help with guarantor loan debts increased by 45% in the last year, from 221 between April and June 2015 to 322 in the same period this year.” ~Citizens Advice
What the price cap on payday loans appears to have done is effectively shifted the problem from one high interest loan product to the rest of the sub-prime lending market. By introducing a guarantor to personal loans as a means of security, it’s affecting both parties instead of just the borrower.
We work with our clients directly without the involvement of associates, friends or family members.
Knowing that ideally, a guarantor loan wouldn’t be the easiest to work with, and risks financial problems to those close to you, it makes sense that borrowers don’t want to use guarantors. Even if they can get someone to agree, it is a high ask with a potentially huge pitfall to the existing relationship or friendship if repayments become problematic.
The only remedy would be to rectify credit report issues
Any application for a secured loan will result in a credit check being done with any one of the big three credit information companies:
- Experian
- Equifax
- CallCredit
Any negative entries on your credit report and it’s a game changer. The vast majority of secured loan applications are rejected.
Following the rejection, applicants usually then turn to the specialist financial firms catering to people with a bad credit history.
The sub-prime market
Working with specialist providers catering to people with bad credit is a good thing. It can be tricky finding a responsible lender though because they all have a policy on the types of risks they find acceptable. It could take a huge amount of applications and rejections before finding a lender willing to provide a secured loan based on the risk they’re presented with. When the finance is needed fast, that’s a problem.
The higher the risk the lender is being asked to take on, the higher the interest rate charged will be and that’s a problem too.
When any business issue is brought up, it raises the risk level even higher because nothing is ever certain in business. And if you’re only starting, you probably don’t have the financial trading history required to prove you can meet the repayment amounts and terms of the loan.
The Solution to Secured Loans, Bad Credit, with No Guarantor
At Jubilee we understand the unique situations of our clients. Our expertise is short-term financing for residential and commercial short-term loans.
We can offer Secured Loans to those with an adverse credit history and we do not require a guarantor.
We’re in the market of solving financial problems. We do that by working with a select group of private lenders in addition to an expert panel of credit lenders whose expertise is providing finance solutions to people with an impaired credit history.