If you don’t have credit, you might be able to get a loan, but there’s a catch. However, applying for a high-interest loan or line of credit isn’t the only loan option available to you. You might also consider applying for a credit building loan or getting a co-signer or guarantor to help improve your chances of getting approved and get lower interest rates.
Can I get a loan without credit?
Yes, it is possible to get a loan with no or bad credit, but the lender may charge you a higher interest rate than if you had an established credit history. If you’re looking for a no-credit loan, here are some options you can explore.
Loans without a credit check
For example, you generally don’t need a credit history to get a payday loan; instead, you must demonstrate that you have a bank account and regular income. (Requirements vary by lender.) But applying for a payday loan should be a last resort, as payday lenders typically charge the equivalent of an annual interest rate, or APR, around 400% (or even higher in some cases) . If you can’t repay the loan when it comes due, you may have to pay a fee to renew the loan. The high interest and fees on these short-term loans, as well as the potential for repeated rollovers on payday loans, means you may end up paying much more than you originally borrowed.
Some online lenders do not offer credit check installment loans. While you can repay this type of short-term loan in a few months in lieu of your next payday, interest rates are usually still high. Some auto dealers also offer No Credit Check Loans Guaranteed Approval Slick Cash Loan, also known as “buy here, pay here” loans. Interest rates on these types of loans may be much higher than those offered by other lenders. The dealer may ask you to borrow more than the car is worth, causing you to overpay. Because of their high interest rates and fees, buying here and repaying the loan here should also be seen as a last resort. You may not have credit because you haven’t borrowed money, or because you borrowed from a lender who didn’t notify the credit bureau to pay.
Alternative Payday Loans
Some federal credit unions offer alternative payday loans in amounts ranging from $200 to $2,000. Some credit unions offer these loans without a credit check. Alternative payday loan fees are capped at $20, as are interest rates. Repayment terms can vary from 1 month to 12 months.
Alternatives to Loans without Credit
Before applying for a personal loan without credit, consider other options. These may include having someone co-sign the loan or taking steps to strengthen your credit before applying for a loan.
If you don’t qualify for the loan yourself, you might consider having someone co-sign with you. If you borrow against collateral and then repay the loan as agreed, your payments will help your credit history. You can also get better rates with co-signers.
Apply for a secured credit card
You’ll deposit some money, usually $300 or less; if you’re approved, the card issuer will give you a credit card with a limit that usually matches your deposit amount. After regular and timely payments for a certain period of time, the card issuer may offer you an unsecured credit card (assuming you offer an unsecured card). Some card issuers notify all three major credit bureaus about secured card payments, which can help you, build your credit history.
Apply for a loan to build credit
Some financial institutions help people build credit through credit building loans. Unlike traditional loans that let you advance cash (if you’re approved), these loans put the amount you borrow (usually between $300 and $1,000) into a restricted savings account. You then repay the loan in installments (monthly payments), and the lender reports your payment to the three major credit bureaus to help you build your credit history. Once you finish paying off your loan, you will receive the full amount you paid.
Apply for a secured loan
If you provide collateral for a secured loan, you may be more likely to qualify for the loan or get a better interest rate. Some lenders offer personal loans if you provide collateral, such as a car or savings account. But keep in mind that if you default on your loan, you could lose your property. And think carefully before you apply for a car title loan. The APRs on these short-term loans are usually around 300%, but they put your vehicle at risk if you can’t make your repayments.
Why are loans without credit so hard to get?
Some people may have no credit history because no activity has been reported to the major consumer credit bureaus, or because the credit bureaus have too few details about them to give them a credit score. Lenders like to check credit scores because they provide a snapshot of how likely someone is to repay their loan or pay their credit card on time. Most lenders look at your credit report before making a loan decision, which means you’ll have a hard time getting money if you have poor credit.
Loans for people without credit often have high interest rates or fees, so think carefully about whether you can afford it. Consider using your savings or having your family co-sign, rather than applying for a loan yourself. As you work to build your credit, it’s a good idea to review your credit report regularly. If you find any errors in your recently reported activity, please contact the credit bureau to dispute the errors.