One of the major benefits of applying for a personal loan is that they are unsecured. This implies that borrowers are not expected to present any collateral, like a car or a property, to get loan approvals. However, this practice also increases the risks of lenders losing the loan amount in case the borrower will default on the loan repayment in case they have no assets to claim.
This is the reason why lenders prefer to approve personal loans for borrowers boasting a decent credit score and a stable source of income to be assured of their repayment capacity. When the applicant does not meet these criteria, lenders might ask for a guarantor to approve the personal loan application. Wish to know whether or not you can get a loan with a guarantor? Let us find out!
What is a Personal Loan Without a Guarantor?
Before understanding the concept of ‘no-guarantor loans,’ it is imperative for you to know who a guarantor is. A guarantor is an individual who agrees to take responsibility for the loan in case the primary borrower fails to repay the loan amount.
While it might appear as a lucrative opportunity for borrowers, guarantor loans can have adverse effects in the following ways:
- As a guarantor, it affects the person’s ability to apply for a personal loan as lenders look into existing liabilities.
- Borrowers can have a hard time finding the perfect guarantor who is willing to take the overall loan repayment responsibility.
- The borrower might end up paying a higher rate of interest for the personal loan with a guarantor. This is due to the higher risks of lending.
Therefore, it is advised to apply for personal loans without a guarantor, also known as ‘no-guarantor loans.’
Eligibility Criteria for a Personal Loan Without a Guarantor
There are certain factors like income, credit score, and employment history that will determine your eligibility criteria for a personal loan without a guarantor. Here is an overview:
- Age: Salaried individuals must fall in the age bracket of 25-65 years. It is the same criterion for self-employed individuals.
- Work or Business Experience: As a salaried individual, you should possess work experience of at least one year. Of this one year, your last 6 months should be under the current employer. As a self-employed individual, you should be running your business for at least 3 years.
- Nationality: In both cases, you should be a resident Indian.
- Minimum Income: As a salaried individual, your monthly income should be at least INR 25k. If you live in a metro city, you should have a monthly income of at least INR 20k. In the case of self-employed individuals, your annual turnover should cross the minimum limit. This limit can vary according to the domain of your work or the nature of your profession.
- Credit Score: In both cases, the credit score requirement is 750 or above.
How to Improve Your Chances of Getting a Personal Loan Without a Guarantor
- Ensure a Good Credit Score: This is an important criterion for ‘no guarantor loans.’ While approving your personal loans, lenders evaluate your creditworthiness based on your credit score. The credit score highlights the history of how you manage debts and finances.
- A high credit score determines your financial responsibility and credibility. This will make lenders feel assured while approving a personal loan without a guarantor.
- Depict a Stable Source of Income: When you have a stable source of income, you can apply for loans without a guarantor. Lenders analyze whether or not you are able to repay the loan easily. An adequate, stable income, like in the case of a salaried individual, is a good indicator of your loan repayment capability.
- To improve your chances of personal loan approvals without a guarantor, make sure that you present a consistent source of income through bank statements, salary slips, or tax returns. Moreover, you can also aim to minimize existing debts to improve the debt-to-income ratio.
- Apply for a Loan with a Co-Applicant: When you apply for a personal loan with a co-applicant, it can be an effective strategy to get a personal loan with a guarantor. A co-applicant can be a close friend or a family member. Unlike a guarantor, both parties will be responsible for repaying the loan amount.
- This process will boost the credibility of your loan application, especially when the co-applicant has a strong credit score and a stable source of income.
Documents Required to Get a Personal Loan Without a Guarantor
- Proof of income
- Address proof
- Identity proof
- Business proof
Advantages of Getting a Personal Loan Without a Guarantor
When you apply for a personal loan without a guarantor, there is no need to waste time searching for a guarantor. Getting a ‘no guarantor loan’ is highly recommended as it will help save your time and effort searching for a reliable person.
Risks of Getting a Personal Loan Without a Guarantor
Securing a personal loan without a guarantor often comes with increased risk for both the borrower and the lender. From the borrower’s perspective, higher interest rates are likely due to the increased risk assumed by the lender.
This can significantly impact the overall cost of borrowing and potentially lead to a debt trap if not managed carefully. Moreover, lenders may impose stricter eligibility criteria and require more substantial collateral to compensate for the lack of a guarantor, making it more challenging for some borrowers to qualify.
How to Apply for a Personal Loan Without a Guarantor
- Build and Maintain a Strong Credit History
- Demonstrate a Stable Income
- Choose the Right Lender
- Consider a Joint Application
Conclusion
Obtaining a personal loan without a guarantor is achievable with careful planning and a strong financial profile. By prioritizing responsible credit management, demonstrating a stable income, and meticulously preparing your application, you can increase your chances of securing the necessary funds to meet your financial needs. Look for a reliable provider like Stashfin to get access to instant personal loans.