Loans without guarantors did not come into the limelight unless the number of complaints against so-called guarantor loans went through the roof. The loans involve a third party, such as your friend or relative, who is obligated to pay off the debt in case of missed payments or defaults.
The loans are aimed at bad credit borrowers, and despite the availability of a guarantor, racked up interest rates were a major concern. As a matter of fact, many guarantors continued to be chased by lenders to make payments even after the demise of the original borrower.
Finding that guarantor loans lack fair treatment, interest rates were capped. Upon the discovery of the fact that guarantor loans are as damaging as payday loans, many people switched to cheaper alternatives.
Guarantor loans ruin finances, and the credit score of a guarantor is also a sufficient reason for a great fall-off in demand. Now, people hesitate to act as guarantors, and therefore no guarantor loans in Ireland have come into vogue.
Key points about no guarantor loans
- You do not need to arrange a guarantor, so the processing speed of these loans is very high.
- You will be completely responsible for the payment of your debt. The lender can take you to court in case of a default.
- These loans are a lot riskier to your lender, which is why they charge high interest rates.
- A no guarantor loan in Ireland is also known as an unsecured loan, emergency loan, and bad credit loan.
How loans with no guarantor help build a credit rating
Loans without guarantors are known to build your credit history. If you have no credit history at all, you can think of using these loans to build it. By paying payments on time over a period of months, you can build a positive credit history.
No guarantor loans also repair your credit rating. A bad credit score will be fixed if you make payments on time. However, there are some important factors to look at:
- Small loans cannot help you with your credit rating
If you borrow a paltry sum, you will be required to pay off the debt on the due date in full. Even if you settle your account on time, you cannot see any improvement in your credit score.
Why?
Because it does not prove to your lender that you can stick to the payments despite the ups and downs in your financial condition.
- Long-term no-guarantor loans may or may not improve your credit history
It depends on how bad your credit score is. Your credit score may be poor because you owed very little debt in the past that cannot highlight your repayment ability. By paying off your new loan on time over a period of months, you can easily show your financial loyalty, which will significantly help you improve your credit points.
However, if your credit report is not up to snuff because of a lot of missed payments and defaults, it will take a lot of time. As old inquiries and defaults fade over time and good marks are recorded on your credit report, you will see your credit score becoming better.
Remember that the score reflected on your credit report is just for you. Your lender will look at the payment history, the number of inquiries and the amount of debt you owe to determine your credit rating. Lenders use their own method to calculate a three-digit number.
Important things to bear in mind while using no guarantor loans to do up credit rating:
- You should carefully examine the problem in your credit score. If you failed to pay off debts in the past because of the worst finances, then the problem is poor money management.
- Only if you are completely confident that you will not struggle with payments are no guarantor loans the best bet to improve your credit score.
- Repairing your credit score takes a long time. Lenders do not bother much about older inquiries, and yet they will charge higher interest rates. Your credit score will technically be better when it disappears from your credit report.
Is there a way to speed up a credit score improvement?
There is no way to speed it up. A few good marks on your credit report can slightly improve your credit score, but that is not enough unless all older inquiries and defaults go away from your credit file. They will take six years to vanish and then your credit score, unless you make a new default, will become very good.
Look out for these problems, too:
- Are you on the electoral roll? It will add 50 points to your credit score. Lenders check it to confirm your identity.
- Make sure you pay off all your bills on time. Do not ignore timely payments of rent and utility bills, too.
- Make sure you are not the victim of identity theft. The number of identity theft cases is on the rise, and it is normal for someone to use your misspelt name or your twin to make a transaction. You should ideally check your credit report every two months to ensure that there are no errors and false accounts.
- You might be paying your credit card bills on time, and yet your credit score is not so good. It might be because your provider reports credit bureaus before you settle your bills.
What if you are refused a loan?
Loans for bad credit in Ireland, if paid over a period of months, can help do up your credit score. However, you still need to show your repaying capacity. You will be turned down if your repaying capacity is not good at all. So, what should you do?
Borrowing for everyday essentials is a horrible idea. Soaring prices continue to hit your buying power. Make sure you chip away at discretionary expenses to stay afloat. Borrowing makes sense for large essential items, but for everything else, you should set aside money.
Suppose you have to buy a laptop that you need for binge entertainment. You can put off the purchase. In the interim, you should salt away money for it. Christmas happen every year, and you go on vacation. It is a kind of fixed expense, so it makes sense to have enough money to celebrate. You can look for a cheaper alternative, such as a staycation.
You should talk to a financial advisor if you are falling into debt. They may propose you a few repayment plans based on your financial condition. A debt management company can help you negotiate with your lenders for lower payments. Once you end the cycle of debt, you can think of ways to fix your credit score and get back in the driving seat.
Wrapping up
Loans with no guarantor can help build your credit score if they are long-term. However, the improvement will be quite slow because old defaults and inquiries will not disappear before their due time. If the problem is with your finances, you should try to fix them so you do not struggle to make payments. Your credit score will automatically be protected.
