If you are a tenant who is looking for a loan there should be a number of options available to you. You will not be eligible for a secured Homeowner’s loan which is a loan secured usually against your property. Homeowner loans are usually available at a more favourable rate of interest but it can put your property at risk if you fail to make payments on the loan.
As a tenant, you would be looking for a personal, unsecured loan. Any resident over the age of 18 can apply and the lender will assess suitability according to their criteria and the decision to lend will be based on how they perceive their risk. A healthy credit score is usually essential as the lender will want to see evidence that you have made and sustained payments to other loans or credit cards. If you have always paid your rent on time, this could be good evidence of your reliability as a borrower.
You are able to check your credit score using one of the many agencies and your check, known as a ‘soft check’ will not affect your credit score. Each time you apply for a loan or a credit card however, a ‘hard check’ is performed and this can impact on your rating as lenders will see that a check has been made and may assume that you already have too much in the way of credit so it is not a good idea to apply to too many lenders at the one time. You can read more about credit checks & loans through TrustTwo here.
The rates of borrowing are usually a bit higher on unsecured loans compared with secured loans but there are still many good options. Lenders will quote Annual Percentage Rates or APRs, this represents the interest that you will be asked to pay for the loan and generally you will be looking for a low number. Some of the APRs can run into hundreds and even thousands of a percent, these loans which include a lot of the PayDay loans should be avoided as they also have very strict criteria and fees when a payment is late or is missed. A small loan can very quickly escalate into a large debt. Ask the lender for this figure and don’t assume that because it is quoted in the ad that you will be given that particular APR. Lenders quote a typical APR which is variable according to a number of factors.
Before applying for a loan, it would also be a good idea to make a list of all of your incomings and outgoings to decide on the monthly payment that you could comfortably make towards the loan, bearing in mind that in the event that you were unable to pay, your credit rating could be adversely affected which could cause difficulty in the future were you to apply for further credit. You should also assess the duration of time for which you would need the loan as there are some good short term options available which would allow you to avoid tying yourself into a loan with regular payments over a period of time. Once you have done all of your homework it would then be wise to examine all of your options before finally committing to anything. Ask questions of the provider, reputable providers should be willing and able to answer any of the questions that you may have.
Your shorter term options would be:
Talk to your bank and ask if an overdraft facility is possible. This is useful if you are able to pay the money back relatively quickly.
Credit cards can be another good option as many of them offer 0% incentives on balance transfers and purchases for a period of time, some also offer travel insurance which is another added incentive.
What about your friends or family, could they offer an option to you but if you are going down this route, make sure everything is written down and clear to both parties as friendships can be easily lost where money is involved.
Your longer term options would be:
Approach Banks, Credit Unions (if you are a member) and shop around. Peer-to-Peer lending is becoming increasingly popular and that could also be an option worth exploring. If you have a poor or limited credit history, it is possible to have a guarantor loan where someone, often a family member would agree to guarantee the loan for you.
Do shop around and remember if the offer seems too good to be true it probably is! Look out for arrangement fees and other hidden charges.