No guarantor loans are personal loans that do not require a guarantor to qualify for a loan. In fact, all loans are no guarantor loans as long as you do not have to arrange a guarantor. Normally, lenders require you to arrange a guarantor in the following circumstances: 

• Your credit score is abysmal.  
• Your monthly earnings do not seem to be sufficient to be able to repay. 

However, when you do not have to borrow a large sum of money, you can apply for no guarantor loans despite a subprime credit history. You will be solely accountable for repaying the debt when there is no guarantor involved.  

The repercussions of non-payment of these loans are severe.  

• Your credit score will be badly damaged.  
• You will not be able to qualify for lower interest rates down the line. 
• Your lender may send your account to collection agencies.  
• If you continue to struggle with payments, you will have to rely on a debt management plan. This will ruin your credit rating. 
• Your lender might take you to a CCJ. 

Are no guarantor loans regulated by the FCA? 

Yes, no guarantor loans are regulated by the FCA. It means lenders must adhere to the lending guidelines that the FCA has set, maintain transparency, and provide fair treatment to all consumers. Registered lenders are supposed to ensure that they do not lend money to someone who cannot repay the debt.  

However, it does not insinuate that unregistered lenders do not provide these loans. It is your responsibility to carefully check whether the lender is registered with the FCA or not. You can do it by checking the FCA Register.  

• FCA authorisation is mandatory because unregulated lenders might be loan sharks who would charge you high interest rates. They will be high enough to trap you into an ongoing cycle of debt.  
• Regulation ensures that lenders will adhere to the FCA lending guidelines. They will provide clear information about interest rates, APRs and other fees and charges. Speaking broadly, they are assumed to be transparent with borrowers.  

Every lender is supposed to act fairly and exercise ethical lending practices.  

How do no guarantor loans work? 

You have to put in the loan application form. Make sure that you provide accurate details related to your expenses, current debts and income. If the loan amount is not so large, for instance, not more than £1,000, you will be required to pay down the debt in one fell swoop.  

Some lenders may put you on a weekly repayment plan, but the repayment period cannot be extended. It will remain one month or less. Normally, these loans are settled within a period of days.  

However, if you try to borrow more than £1,000, there is a chance that the cost of the debt can be extended over a period of months. You will be paying down the loan in fixed instalments. The size of the instalment will be decided by your lender. 

If you choose a long repayment period, the size of the monthly instalment will be smaller, but you will end up paying a lot more interest. You should choose the repayment term carefully. Ideally, it should be neither too short nor too long.  

When the loan amount is small, no-guarantor loans can be approved the same day. It takes a couple of hours to complete the approval process. But when you are borrowing a large amount of money, you might have to wait for one or two business days. This is because a lender will peruse your credit report.  

Only if your credit report is stellar will you be able to qualify for these loans. Registered lenders usually do not accept applications from subprime borrowers for a no-guarantor loan when the loan amount is large.  

Very bad credit loans with no guarantor from a direct lender can be qualified without a hard check, as the borrowing amount is quite small. Lenders will run soft inquiries to determine your repayment capacity.  

Benefits of no guarantor loans 

Here are the advantages of no guarantor loans: 

• One of the biggest advantages of no guarantor loans is that they are convenient. If you are to borrow a small amount of money, you do not have to undergo a complicated process, and the money is disbursed the same day. 
• You do not have to bear the risk of losing your credit points, as these loans are approved without running hard credit inquiries. Lenders run soft inquiries, and they do not appear on your credit report. A hard credit check is made only if you are to borrow a large amount of money.  
• You do not have to arrange a guarantor even though you are a subprime borrower. You will be completely responsible for your loan.  
• Depending on the loan amount, these loans come with different repayment periods. Repayments could be weekly, bi-weekly or monthly.  

Things to consider while taking out no guarantor loans 

Here are the factors to consider while using no guarantor loans: 

• Interest rates – you should carefully examine interest rates. They vary by lender. Some may charge lower rates than others. If you have a less-than-perfect credit score, the chances of getting high interest rates are high. 
• The total cost – you should carefully consider the total cost of the debt. Do not just focus on interest rates, but also focus on fees and associated charges. If possible, try to get prequalifying letters from lenders. This will help you easily compare and get an estimate of the total cost.  
• Repaying capacity – you should carefully assess your repaying capacity. Do not apply for these loans if you are not completely certain about your repayment capacity.  

The final word 

No guarantor loans are regulated in the UK, but you will have to carefully research whether the lender you are borrowing money from is registered or not. Further, you should assess your repayment capacity, so you do not fall into an abyss of debt down the line.