Personal Loans
Getting a personal loan with no credit is possible with some lenders, but note that there may be strict requirements and hefty terms. Lenders often use credit scores to determine your rates and terms, as it’s a good basis for understanding whether or not you’re likely to repay them. However, if you have no credit built at all, they won’t be able to tell if you can repay them, thus the high interest rates.
Despite these limitations, it’s possible to find a personal loan with no credit through some online lenders, credit-builder loans and more. Understand what your options are when you have no credit and how to apply to lenders to build your credit.
Key Takeaways
Getting a personal loan with no credit is possible, but it may be challenging.
If you have no credit, you can explore online lenders, credit-building loans, paycheck advances or secured credit cards.
Build and monitor your credit by making on-time payments and regularly reviewing your credit report or using credit monitoring services.
What Does Having No Credit Mean?
A credit score is an indicator that reflects your capacity to repay loans and debts, including credit cards, auto loans, mortgages and more. Loan providers, credit card companies and other financial institutions all utilize your credit score to determine your eligibility for their financial products.
Credit scores are calculated using five core factors:
- Payment history (35%)
- Amounts owed (35%)
- Length of credit history (15%)
- Credit mix (10%)
- New credit (10%)
Having no credit means you do not have a long enough history to inform lenders about your payment habits — and it is not at all similar to having bad credit. The difference between no credit and bad credit is that the latter indicates nonpayment of financial obligations, which informs lenders that the borrower is not responsible with payments.
Certain individuals may not have a credit score for the following reasons:
- You've never taken out a loan or applied for a credit card: If you've never applied for any line of credit, you are unlikely to have a sufficient credit history.
- You don't have any recent activity on your credit account: If you have a credit account but aren't using it, there's nothing for your lender or card provider to report to credit bureaus. Having an account is not enough — you must have activity.
- You're a recent immigrant in the U.S.: If you've just moved to the U.S., your credit history is likely short or nonexistent, as any activities from your home country will not count toward building your U.S. credit score.
- Your credit account has just been opened recently: Having a new account does not increase your credit score. Generally, opening a new account actually reduces your score temporarily. But making consistent, on-time payments will help you steadily increase your score.
- Your credit history isn't being reported: If your lender or provider is not reporting your credit history to the credit bureaus, your score will not increase.
Having no credit can make reaching financial goals challenging. Since lenders use it as a basis of judgment to approve loan or credit card applications, they won’t be able to tell if you’ll repay them or not, and the safest option would be to reject you. As a result, you’ll have difficulty applying for most kinds of loans and credit cards.
Loan Options With No Credit
It’s not impossible to get a personal loan if you don’t have credit — but it may be more challenging. After all, building credit doesn’t happen overnight. Fortunately, there are other avenues you can explore in the meantime if you’re in need of funds. If you exercise patience and discipline when making payments, your credit score will increase in no time.
LOANS FROM ONLINE LENDERS
Many online-only lenders boast relaxed requirements for borrowers. Some lenders use nontraditional underwriting methods to determine your terms, while others use traditional methods but offer high interest rates.
PAYCHECK ADVANCES
Some companies offer paycheck advances through third-party apps, such as Dave, Earnin or MoneyLion. This allows you to borrow an amount of money for a fee, which is then deducted from your next paycheck.
CREDIT-BUILDER LOANS
Credit-builder loans allow you to save and build credit at the same time. The borrowed amount is held in a bank account while you make payments, and once you’ve completed your payments, you can take the money from the bank account to use for any purpose.
SECURED CREDIT CARDS
A secured credit card is a line of credit that requires a security deposit, which often serves as your credit limit and your collateral. This is a great option to improve your credit.
FRIENDS AND FAMILY
As a last resort, you can borrow from friends and family. To make things official, you can draw up a formal agreement and have it signed by both parties.
RED FLAGS TO AVOID
There are many unscrupulous lenders who claim to offer personal loans with no credit checks, but some may be scams. Knowing the signs can help you avoid losing your hard-earned money to scammers:
- No credit checks
- Demanding upfront payment
- No online reviews or mostly negative reviews
- Not registered in your state
- No contact information or address
How to Get a Personal Loan With No Credit
If you’re planning to get a personal loan with no credit, knowing the steps ahead of time can help you prepare for the process.
1
Shop around for lenders
Don’t opt for the first lender you see. Different lenders look at your financial history differently, and comparing offers from several lenders can help you find the best option for you.
2
Choose a loan option
Once you’ve looked at several lenders, take your time to choose a loan option. Evaluate the terms and fees of each lender to find the lowest or best term for you.
3
Go through the application
If you’ve narrowed down a lender, look up their application process. Prepare your documents and submit an application form.
4
Receive funds
If you’ve been approved, wait to receive the funds and make a payment plan to repay the loan.
CAN’T QUALIFY? GET A CO-SIGNER
Having a co-signer is the key to getting a personal loan with no credit. If your co-signer has good credit, they can potentially help you get better rates and terms. This is because they hold equal liability for the loan — if you are unable to repay it, your co-signer will be on the hook instead.
Ways to Monitor Your Credit
Having good credit can help your financial prospects in a myriad of ways. For instance, good credit generally gives you better terms on financial products like personal loans, mortgages, auto loans and more.
However, to get good credit, you need to practice a combination of responsible financial behavior and consistent monitoring.
- Get a copy of your credit report: You are entitled to one free copy of your credit report per year with each credit bureau.
- Monitor your credit health regularly: Checking in on your credit can help you spot inaccuracies you can dispute and give you a better understanding of how your actions affect your credit.
- Use credit monitoring services: A credit monitoring service can help you watch over your credit reports and alert you to any changes.
- Maintain good credit habits: By paying off your accounts on time, you will slowly and steadily improve your credit.
FAQs About Getting a Personal Loan With No Credit
Obtaining a personal loan with no credit score can be challenging — but not impossible. Learn about the ins and outs of getting a personal loan with no credit through our answers to some of the most frequently asked questions.
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