Guarantor loans are loans that require a guarantor – often a friend or family member – to co-sign the loan agreement. The guarantor takes on the responsibility of repaying the loan if you cannot make any repayments yourself for whatever reason. This way, the loan is more secure for the lender, as it becomes more likely that they will be repaid for the loan.

No guarantor loans are for those people who cannot find someone willing to be their guarantor on a loan. There are plenty of no guarantor loans available that don’t require a second person to co-sign the agreement. No guarantor loans are often used to describe loans that people with bad credit and no guarantor are given.

No guarantor loans require a simpler application process than other loans, but they will likely cost more money to the borrower because lenders see no guarantor loans as a greater risk.

Finding a loan without a guarantor is easy, but it can come with some disadvantages. You will have to pass affordability checks and have all the necessary paperwork in order to apply for the loan. It can also be very expensive to find a no guarantor loan, so do your best to find a guarantor as it could save you a lot of money in loan repayments.

There are multiple loan products that do not require a guarantor including:

• Peer to peer loans
• Short-term loans
• Personal (unsecured) loans
• Specialist bad credit lenders

These are the most common no guarantor loan options but there are also the more traditional credit line products or bank account overdrafts. These options set borrowing limits that allow you to take money at any time within the limit. You can then repay the amount you use in multiple transactions, sometimes without any interest on the amount you have borrowed.

The cost of a loan without a guarantor will vary greatly depending on your personal circumstances and the lender you choose. The main factor that determines the cost of your loan and the interest rate is the risk that the loan poses for the lender. The higher the risk, perhaps due to a bad credit rating or a lack of regular employment, the higher the interest rate on the loan will be.

It is advisable to always find a guarantor where possible in order to bring down the cost of your loan agreement.