What are the Requirements for a Tenant Loan?

Tenant loan requirements are far less stringent than secured forms of lending. If you can demonstrate the ability to repay the tenant loan at the interest rate offered to you, the qualification process is simple and fast. It is important to understand how tenant loans work and what affect your credit history, current housing situation and ability to repay affect your loan.

How Tenant Loans Work

For most types of lending, some kind of security is required. For instance, with a home equity loan or line of credit, your home is your security. For personal loans, often a cash deposit or plegde of an item of value - such as jewelry - serves as collateral.

But tenant loans, which are popular in the United Kingdom - were developed to meet the legitimate borrowing needs of the large and growing number of apartment dwellers who don’t have a home to pledge as security.

Terms You Can Live With

Tenant loan requirements include loan terms that are within your ability to repay. As an example, the amount you can borrow with a tenant loan ranges from the British pound equivalent of about $500 to $7,500. If you need to borrow more, a secured loan will be a better alternative. If you have a very strong credit history and a demonstrated ability to repay a loan for a larger amount, you can borrow up to the equivalent of $15,000 from some lenders.

You also must be able to repay the loan in normal loan repayment period of about six months to 10 years. Secured loans, particularly against a home, can be for much longer. And, as with the loan amount, depending on your personal financial circumstances, you can receive a tenant loan with a repayment period of up to 15 years

Tenant loan requirements typically include interest rates that are one to two percentage points higher than secured loans. This is because an unsecured loan represents more risk to the lender and the higher the risk, the higher the interest rate. So tenant loan requirements include your ability to meet loan payments at stated interest rates for the agreed loan amount within the agreed repayment period.

Adequate Income

Tenant loan requirements focus on the income of the borrower because there is no collateral. Given the discussion of repayment terms above, the borrower’s income must be sufficient to pay existing expenses, debts and the additional cost of the tenant loan. 

Don’t Disqualify Yourself

Tenant loan requirements are easier to meet than many other types of lending because the cost of the risk is built into the loan repayment terms. This means if you have bad credit, low income or even and unconventional housing situation, you can still be considered for a tenant loan. In many types of lending, you be required to get a co-signer or put up substantial collateral. But tenant loans include loans specifically designed for those with bad credit, those living in subsidized housing or even those still living with parents.

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