Tenant loans are also known as non-homeowner loans. Loans are usually easily provided to those who have fixed accommodation. Since tenants keep moving out, it calls your credibility into question. You might find it difficult to track when any formal communication is to be made at your residential address, especially in case of missed or late payments. Still, there are a few lenders who provide instant money with no guarantor.
Applying for tenant loans is not a cinch. While you do not have a fixed abode, you should still be able to prove that you have been living in the current house for a long period of time. This ensures that you keep up with rent payments, and there is no risk of you being evicted by your landlord.
What are the features of tenant loans?
Here are the features of tenant loans:
- They come with a very small amount of money. Most of the lenders cap these loans at £1,000.
- They are aimed at meeting small emergency expenses such as a car repair, an unexpected medical bill, and the like.
- They carry very high interest rates. The APR of these loans could be as high as that of payday loans.
- You will be required to discharge the whole debt in one fell swoop, which means you can get rid of the debt after making one payment.
Are tenant loans accessible for the unemployed?
Not all lenders will approve your application for a tenant loan if you are out of work. Few lenders, however, provide these loans. It does not insinuate that you do not have to prove your repayment capacity.
In order to apply for loans for tenants on benefits, you must have supplemental income, which includes income from babysitting, pet sitting, Uber driving, freelancing, and so forth. Only if you prove your repayment capacity will a lender approve your application.
Since these loans are short-term and require you to discharge them in full once and for all, a lender would like to ensure that you do not struggle to pay for your essential expenses due to the debt payment. Otherwise, you will end up getting caught in an ongoing cycle of borrowing money.
If you do not have a side gig, you can consider unemployment benefits as your income. However, you will be able to qualify for a very small amount of money.
What are the types of tenant loans?
There are three types of tenant loans:
| Loan types | Description |
| Guarantor loans | Tenants can also apply for guarantor loans if their creditworthiness is not strong. You will have to arrange a guarantor with a good credit score who will be responsible for discharging the debt in case you commit a default. |
| Unsecured loans | When a tenant applies for unsecured loans, they are called tenant loans. As the name suggests, you do not have to secure them against any valuable asset. Personal loans are aimed at tenants when their repayment capacity is strong |
| Loans for people on benefits | Loans for people on benefits are aimed at those who are unemployed and living on benefits. You may or may not be asked to arrange a guarantor, depending on your financial circumstances. |
| Text loans | Text loans are taken out by those who have already existing borrowers. Since credit details are saved with the lender, these loans help complete the process fast |
No matter which type of loan you are applying for as a tenant, your credit rating must be decent to qualify for lower interest rates.
What are the alternatives to tenant loans?
Tenant loans are quite expensive. It could be challenging to repay them. It is enjoined that you carefully consider your repayment capacity. You should never borrow money when your budget does not have wiggle room. Here are the alternatives that you can consider instead of tenant loans:
- Borrow from friends and family
First, you should consider borrowing money from friends and family. They will be able to lend you a small amount of money, provided your relationships with them are good. One of the significant benefits of borrowing money from friends and family is that they will not charge interest rates.
However, it is suggested that you pay some money on top of what you borrow. This will prevent their buying power from being reduced. Make sure that you sign a formal agreement, as it increases trust and credibility. Pay back the money as agreed. Otherwise, your relationship will be affected by them.
- Credit unions
Tenant loans from direct lenders charge very high interest rates. If you want to qualify for competitive interest rates, you should consider borrowing from credit unions. They charge more affordable rates than direct lenders.
However, they will run a hard credit check. This will result in losing your credit points. If your credit rating is not stellar, they will likely restrict you from borrowing a larger sum.
What to consider while applying for tenant loans?
Here is what you need to consider while applying for tenant loans:
- Though lenders run soft checks, you should still try to maintain a good credit score. Few lenders and credit unions prefer to run a hard check. A good credit score implies that you can qualify for lower interest rates.
- Lenders will assess your credibility before approving your application. However, it is still important that you carefully assess your budget because you cannot stop payments just because you have borrowed more than your repayment capacity.
- If you try to borrow money with the agency of a broker, you will have to pay brokerage fees. Be careful about additional payments.
The final word
You cannot stop borrowing money just because you are a tenant. There are various direct lenders who provide tenant loans. Even if you are on benefits, you can get approval for these loans.
These loans can be slightly expensive. You should carefully determine your repayment capacity. Your chances of qualifying for lower interest rates are high when your credit report is up to scratch.
