Tenant Loans
If you rent, share or live with your parents a tenant loan is likely to be the most applicable form of finance. Also, if you'd like to read up on this type of borrowing, make sure you review our detailed guide.
About Tenant Loans
Tenant loans are available to people who require personal finance and do not own
their own home or do not have any assets to offer as security against a loan.
A tenant can be defined as someone who rents his or her property, lives with parents
or cohabits a property with either a friend or any other private individual.
Tenant loans are often considered to be a risky prospect by the lending industry
for a number of reasons, chiefly however these consist of the following: -
- As the applicant is a non-homeowner, collateral cannot be offered as security against the loan.
The loan is therefore issued on an unsecured basis meaning that a certain element of trust
is required on the lenders part.
- Typically, very few tenants have a fixed address and/or permanent residence.
This factor can be particularly unnerving for any prospective lender especially
if a number of addresses are listed over a short space of time.
- A high percentage of tenants tend to stem from younger demographics, which can often
result in the applicant having a limited history of credit. This trait can
again be undesirable for many loan providers.
Although the above points may appear to be edging into the realms of negativity, they are not intended to deter a tenant from applying for a loan or indeed suggest that such loans are difficult to come by. There are many thousands of non-homeowners who are successful in their pursuit of a tenant loan but it is important to realise that stringent guidelines are put into place as part of the process.
How much can I borrow
UK Tenant Loan plans currently range from £500 up to £25,000, although it is quite rare for requests at the higher end of the scale to be granted, especially if the loan is needed over an extended period of time. As a general rule of thumb, if the applicant is seeking an advancement in excess of £15,000 the chances of completion are substantially reduced. The current industry average for an agreed tenant loan advancement stands at around £4,500, however this may also be because the vast majority of applicants request a loan with a value of less than £5,000. For an applicant to stand any chance of success on high value tenant loans, coherence and consideration of the following points will be crucial: -
Past credit history - The applicant must be able to display a positive history of credit. By this, the applicant will have successfully completed and/or managed at least one other credit product in the past such as a credit card, car finance agreement or a previous loan. If the applicant had defaulted on or mismanaged an agreement the chance of qualifying for a high value tenant loan is sizeably reduced.
Age of applicant - Although viewed by some as being slightly discriminatory, the age of an applicant can have a bearing on tenant loan eligibility. Younger applicants can be deemed as being less reliable than an applicant who is older in years. It is also important to realise that few providers of tenant loans will consider an application from individuals who are under the age of 21.
Tenant Loan set up fees
For the broking industry in particular, tenant loans can be far less profitable than other forms of personal finance. For this reason some providers may couple a "set up" or "arrangement" fee into the actual cost of the loan. This type of charging is used by brokers to levy the costs associated to arranging a tenant loan and to also make it worth their while from a financial perspective. The actual amount and way in which such fees are charged can vary greatly and it is very much at the brokers discretion as to how and indeed if such fees are charged. What consumers must remember is that not all tenant loan providers will charge a fee and the decision as to whether such charges are accepted, rests solely within the hands of the applicant.
Alternatives to tenant loans
If you are unsuccessful in your pursuit of a tenant loan or if you decide that the terms of the loan are not suitable to your requirements there are other avenues that you could consider. Below we have listed some of the more common alternatives: -
Credit Cards - For some applicants a credit card can present a far more beneficial and indeed ideal route to borrowing. Typically, credit cards are slightly easier to qualify for than tenant loans and also offer a unique flexibility to borrow as and when the funds are needed. There are also more providers of credit cards in the UK, than there are of tenant loans meaning greater choice.
Student Loans - If you are applying for a tenant loan with the intention of using it to cover costs associated to higher learning, you may be more successful applying through a specialist student loan provider. Unlike tenant loans, student loans are specifically geared towards the younger end of the market meaning that age is less of a restriction.
Car Finance - If the applicant's intention is to use their tenant loan as a means to solely fund the purchase of a new car, a car finance agreement may also present a suitable route to borrowing. However, it is important for applicants to realise that car finance is only usually applicable if the car is to be bought through a registered garage or dealership and will therefore exclude purchase from a private individual.
