Last updated: 16/10/2020 | Estimated Reading Time: 4 minutes
If you don’t own your own home and you’re looking to secure additional finance, you might be thinking about what your available options are. Tenant and non-homeowner loans provide you with finance that is normally unsecured so that you don’t have to use your assets as security to borrow money. Read our useful guide to find out more about potential loans for tenants and non-homeowners.
In This Guide:
- What are tenant loans?
- How to find the best tenant loans
- The Rental Exchange
- Alternative loan options
What are tenant loans?
Tenant loans are personal loans suitable for tenants and non-homeowners and are a form of unsecured borrowing. Unlike a secured loan, you don’t have to provide the lender with any form of security.
Even though tenant loans are unsecured, you will still be subject to a credit check and will have to show that you can afford to pay what you have borrowed. Personal loan interest rates may also not be as competitive as the rates attached to secure borrowing.
How to find the best tenant loans
When looking for a tenant loan the most suitable loan is likely to be one that offers the lowest interest rate for the loan you need, and for the time you need to pay it back. The best way to find the right tenant loan for you is to compare loans online and shop around. That way you are giving yourself the best chance of finding a loan that is suitable for you.
Your credit history will play a big part in how much you can borrow and what interest rate you will be offered. Employment status and income will also affect your potential to get a loan, so may sure you work out what you can afford before committing to a loan.
You can apply for a tenant loan if you aren’t renting or if you’re self-employed. However, you will need to have at least 1 year’s audited accounts to prove your income is suitable.
The interest rate you receive will be based on:
- The loan amount you want
- The length of the loan you want
- Your credit history
The Rental Exchange
One problem that many people have is that they do not have a credit history, because they have never borrowed money before. Lenders then have little evidence that you’re a responsible borrower and may stop you from securing loans and good interest rates.
Experian have therefore introduced The Rental Exchange to help improve tenant’s credit scores by incorporating tenants’ rent payment history on their credit report. By registering to The Rental Exchange or Credit Ladder your rental payments will be tracked, and you can improve your credit history by continuously paying your rent on time.
Alternative loan options
Tenant loans aren’t the only possible line of credit available to you. There are other forms of loan that could be more suitable to your needs and financial situation:
- Overdraft – if you don’t already have an overdraft on your bank account then you can contact them to add an overdraft facility to your account. This allows you to use more money than you have in your account. Interest rates when you use your overdraft are usually around 15-20% APR and may also have additional charges.
- Credit card – if you’re only after a small sum of money then this may be a better option than a tenant loan as many providers offer a 0% interest-free period.
- Friends and family – the cheapest and most flexible way to borrow money is to ask friends or family members to help you out. You can agree a term that suits both parties and you are unlikely to have to pay interest.
Can I get a guarantor loan when I’m a tenant?
Guarantor loans often do not have requirements for applicants to own their own homes. There are non-homeowner guarantor loans available but this can get complicated and risky as if the person whose loan you are guaranteeing can’t make their repayment then you’ll have to pay even more.
Can I get a loan if I’m a council tenant?
Many lenders will now accept applications from council tenants but be careful to check this before you apply. You can tarnish your credit history by having a loan application denied, and some lenders would never have accepted it in the first place. Contact lenders directly before you apply if you are unsure.
What happens if I miss a repayment on my tenant loan?
If possible, you should always get your loan repayments paid on time as missing them can have serious consequences on your financial wellbeing. You will probably have to pay a late payment fee, your interest may rise, and your credit score will be affected. If you foresee yourself missing a loan repayment, get in touch with your lender to see if they can help you out.
Can I get a joint loan with another tenant?
Yes, but you will both need to pass the lender’s criteria, so make sure you have checked your credit histories and both registered at the same address to improve your chances.