A Guide to No Guarantor Debt Consolidation Loan

If you’ve got multiple loans and debts, you know how difficult it is to stay on top of each one. As such, a debt consolidation loan could be a great way to find yourself some peace.

But can you get a debt consolidation loan in Australia without a guarantor, or is it just not possible? 

Well, let’s see the answer down below. 

What this article covers:

What Is a No Guarantor Debt Consolidation Loan? 

As you already know, debt consolidation loans allow you to merge all your existing debt into one much simpler debt. 

That being so, you’ll have a much easier time managing your debts. You won’t have multiple creditors, interest rates, monthly payments, and repayment dates. Just one loan to keep track of and one creditor to respond to. And best of all, the interest rate of your debt consolidation loan will usually be lower than those of your multiple debts. 

As great as all these sounds, lenders don’t give out debt consolidation loans willy-nilly. Since this is an unsecured personal loan, the lender is at risk of losing a considerable amount of money if the borrower defaults on the loan.

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So, what do they do, especially when their clients have exceedingly bad credit? Well, there are two options.

Either they ask you to place a valuable personal asset as a security, or they ask you to bring on a guarantor. This is someone who’ll be required to repay the entirety of your debt in case you fail to do so.

But what happens if you can’t find a guarantor? This is when no guarantor debt consolidation loans come into play. 

As the name implies, this is a loan that doesn’t necessitate a guarantor for loan approval. As long as you’ve got a stable source of income and good-enough credit, you can take out a no guarantor debt consolidation loan without any hassle. 

Benefits of a No Guarantor Debt Consolidation Loan

No guarantor debt consolidation loans offer many advantages, including:

  • No embarrassment: Not needing a guarantor means you don’t have to divulge your personal situation to your family members and close friends. Moreover, you won’t have to deal with the humiliation that comes if they refuse to be your guarantor.
  • Ease of payment: A debt consolidation loan makes it so much easier on you to repay your debts. That’s because you don’t need to juggle different creditors, each with his own interest rate and schedule. You just need to make 1 monthly repayment.
  • Control over your loan: You have control over your loan term and monthly payment amount.
  • No stressful calls from creditors: Since all your previous creditors will be repaid, they’ll stop hounding you for their money. So, no more threatening calls or letters!

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  • Lower/frozen interest rates: Typically, the interest rate of a debt consolidation loan is lower than that of multiple debts. So, with a debt consolidation loan, you’ll have more money to yourself at the end of the month.
  • Improved credit score: If you make your payments on time and fully repay the debt consolidation loan, your credit score will become significantly better.
  • Reduced risk of collateral repossession: If you haven’t been making good on a secured loan, it’s only a matter of time before your creditors repossess your collateral. By consolidating your unsecured loans, you have a better chance of keeping your valuable possession, be it your car, house, or jewellery.
  • Reduced risk of lawsuits: If your previous loans were unsecured, then your creditors can take you to court if you fail to pay the loan back. Once you consolidate your loan, these creditors will leave you be, allowing you to focus on paying your new creditor.  

Drawbacks of a No Guarantor Debt Consolidation Loan

As with everything, it can’t all be sunshine and rainbows. So, let’s see the cons of debt consolidation loans, shall we?

  • Unrealistic promises: Unfortunately, some companies give the illusion that debt consolidation loans will get you out of debt however much you owe. But that’s not always the case. It may help a bit, but a loan is still a loan. A no guarantor debt consolidation loan has a higher APR as the lender has no means of security.
  • Hidden costs and expenses: It’s true that debt consolidation loans come with lower interest rates. However, the company may charge you extra for services like application fees, legal fees, valuation fees, and stamp duty. So, make sure you’ll be paying less, not more, when you take out a debt consolidation loan.
  • Untrustworthy lenders: Sadly, some lenders will try to take advantage of their clients. For instance, they’ll ask you to sign blank documents, not stating in them your loan cost and interest rate. They may refuse to discuss repayment terms and try to rush the process. So, take care of these untrustworthy lenders.
  • Potential loss of provisions: Taking out a debt consolidation loan will prevent you from getting certain provisions like rebates and interest rate discounts.

debt consolidation loan

Can You Get a No Guarantor Debt Consolidation Loan If You Have Bad Credit? 

Honestly, it’ll be very hard to find a lender willing to give you the money. 

If you’ve got bad credit, most will stipulate you find a guarantor to get the loan.

Some may give you no guarantor debt consolidation loan, but only if you provide security in the form of a car, house, etc.

Once in a blue moon, though, you may be able to find a lender willing to give you a debt consolidation loans without guarantors or securities. However, keep in mind that your debt consolidation loans with bad credit will incur a higher-than-average interest rate. 

If that happens, compare your new interest rate with your old one. If the debt consolidation loan costs more than keeping your debts separate, don’t apply for it. 

Again, it’s a bit difficult for Centrelink recipients to get a no guarantor debt consolidation loan. That’s especially true if most or all of your income comes from government benefits. 

Why? That’s because Centrelink payments aren’t exactly lucrative. As such, many lenders feel that Centrelink recipients won’t be able to make good on the loan payments. 

As such, it’s very likely you’ll be asked to find a guarantor for your loan. 

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What Types of Debt Can You Consolidate? 

Fortunately, you can consolidate various types of debts including:

  • Personal loans
  • Payday loans
  • Hire purchases/Instalment plans
  •  Credit card debt
  • Store cards
  • Utility bills
  • Student loans
  • Medical and dental bills

What are the Alternatives to a No Guarantor Debt Consolidation Loan?

If you think a debt consolidation loan isn’t the right fit for your financial situation, here are a few other things you can try:

  • Credit card balance transfer
  • Debt agreement 
  • Financial hardship assistance
  • Selling/refinancing a property

What’s the Difference Between Debt Consolidation and Debt Agreement?

Quite simply, debt consolidation aims at lowering the number of creditors you’re dealing with as well as the cumulative interest rate. 

Meanwhile, a debt agreement, aka Part 9, aims at lowering the amount you owe to your creditors. 

How?

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Basically, a third party contacts your lenders and negotiates on your behalf to cancel the interest rate on the loan. If the lenders agree to settle, you’ll only be required to pay back the remainder. As such, a debt agreement can be a great way to avoid filing for bankruptcy. 

However, it comes with its own share of troubles. For instance, it can affect your ability to get future credit. Moreover, your name will be listed on the National Personal Insolvency Index (NPII) for a limited time. 

So, don’t confuse debt agreement and debt consolidation. Each has its uses, and each comes with its own set of pros and cons. So, think carefully about which one you need before choosing. 

Conclusion

Getting a no guarantor debt consolidation loan is an excellent tactic for managing multiple debts. Not only will you say goodbye to multiple deadlines and different creditors, but you’ll also spare your loved ones from being in a very difficult position. 

Just keep in mind that you’ll have a hard time getting a no guarantor debt consolidation loan if you’ve got really bad credit or if you’re a Centrelink recipient.If neither of these situations applies to you, getting a no guarantor debt consolidation loan should be a piece of cake.

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