Applying for a Tenant Loan with Bad Credit

Borrowers can get a tenant loan with bad credit even if they have no collateral, however, they will face more restrictive terms and higher interest rates. These loans offer borrowers who do not own a home an opportunity to get a loan. To make your strongest application for a bad credit tenant loan, it’s important to know what tenant loans are, what typical terms are and how bad credit affects your loan.

What Are Tenant Loans?

Tenant loans originated in the United Kingdom to meet the borrowing needs of a growing number of people who did not live in dwellings they owned. These borrowers included apartment dwellers, those in public housing and even young adults living at home with parents. Lenders recognized that many potential borrowers with good credit scores and steady employment had insufficient collateral for small- to mid-size loans. Tenant loans were created to give unsecured loans to these borrowers. As with loans in the U.S., bad credit tenant loans followed to expand the benefits of this borrowing to those with lower credit scores. 

Tenant Loan Terms

Tenant loans range from $500 to $7,500. Larger amounts are also provided up to approximately $15,000, depending on the borrower’s financial circumstances.

Typical repayment terms range from six months to 10 years. The payment terms also vary according to the financial standing of the potential borrower and what the loan is being used for.

Tenant loan interest rates are higher than secured loans. All loan terms and costs are based on the risk to the lender. Because the loan is unsecured, the lender’s risk is increased. Tenant loan rates are one to two percentage points higher than secured loan rates for good borrowers.

Tenant Loans With Bad Credit

In the United States, credit card companies actively seek bad credit borrowers. Since the risk of lending to those with bad credit is assumed to be higher, these lenders charge higher interest rates and have more restrictive terms. The same is true of tenant loans. There is an array of lenders who will offer bad credit tenant loans to potential borrowers with low credit scores. The interest rate offered will be between two and three percentage points higher than for borrowers with solid credit. Additionally, borrowers of bad credit tenant loans can expect more restrictive payout terms, such as a short payout period and smaller loan amounts. 

Getting Your Best Loan

Because all tenant loans - including bad credit tenant loans - are unsecured, your ability to repay and your credit history are closely evaluated by the lender. For a bad credit tenant loan applicant, a stronger job history and debt-to-income ratio will strengthen an application. You can improve chances of loan approval and your chances of getting the best terms available by reducing expenses, particularly by paying off other debt, prior to applying for a bad credit tenant loan.

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