A tenant is an occupier of a property, premises or piece of land. The tenant does not own the asset, however they will often pay rent to the property owner or landlord.

A tenant will hold a legal relationship with a landlord which will outline several responsibilities. The tenant will agree to pay all rent on time and in full. They must also comply with any property rules surrounding pets, smoking and decorating, and will also agree to give proper notice to leave in line with the tenancy agreement. If at any time a tenant breaks the contract, the landlord may request that the tenant is removed from the property.

A person may also be classed as a tenant if they are living with parents, regardless of whether they are contributing rent.

Tenants and the loan market

As a tenant, you will be ineligible for a secured loan. This is because secured loan providers will require applicants to place their home as security for the loan. If the borrower fails to pay a secured loan, the lender is within their rights to repossess the property.

Instead, tenants can apply for unsecured loans. The loans are not secured against an asset such as a property. Subsequently, they may carry slightly higher interest rates than secured loans, however nowadays this is marginal. Interest rates will also vary hugely depending on the type of unsecured loan you’re applying for.

With unsecured loan, the lenders will assess applicants based on several factors including their level of income and credit history. Typically, those with a good credit score will be able to access loans at lower rates (such as those offered by banks or supermarkets). Whereas those with a poor credit will need to look more towards the subprime market for products like guarantor loans, instalment loans and logbook loans.

Tenant guarantor loans

If you’ve been in the market for a guarantor loan, you may notice that several lenders now offer “tenant guarantor loans”. With tenant guarantor loans, the applicant does not have to provide a homeowner guarantor to support the application, but can instead use a tenant as guarantor.

Historically, lenders would only ever accept homeowners as guarantors. However as the market has grown, many lenders are now willing to accept tenants. To be considered as a tenant guarantor, you must have an immaculate credit rating and sufficient disposable income. Typically, tenant guarantor loans carry a slightly higher interest rate than the regular homeowner product.

To summarise, a tenant can be someone who occupies a property but does not own it. They often rent the property of a landlord. Tenants cannot apply for secured loans and must instead look for unsecured loans. Nowadays, many lenders will accept tenants as guarantors, however they must have an unblemished credit record.

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