How To Get a Loan With No Credit 

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It’s possible to get a loan with no credit. However, the pickings will be slim. You may need to offer some form of collateral or apply with a cosigner who has respectable credit.

Here’s a more on how to get a loan with no credit.

What Lenders Look for if You Have No Credit

A credit history is sort of like a performance report for your ability to handle credit. If you’ve got no credit history, the bank has a hard time assessing whether it’s risky to lend you money. In this case, they look for other tells, such as:

• Income and employment history: Do you have a stable job with sufficient income? A lender wants to see you’re not out of work or prone to it, so this can go a long way toward approval.
• Payment history: Paying your credit card bill every month isn’t the only way a lender can get an idea of what type of customer you’ll be. Banks may look at the payment history of your utilities, rent, etc.
• Security: If the bank is hesitant to lend you money, it may ask for some sort of guarantee. This may come in the form of a refundable security deposit, an asset that you’re willing to pledge or a cosigner who does have good credit.

Your most foolproof option will typically be to open the loan with a cosigner with excellent credit. The bank will factor their creditworthiness into its decision. Just know that if you can’t make your payments, the cosigner is responsible for repaying the money.

Best Types of Loans for No Credit

The best types of loans for no credit are those designed for limited or bad credit history. This includes:

Credit-builder Loans

Some financial institutions allow you to open an installment loan without giving you the money upfront. Instead, as you pay off the loan, you’ll receive access to your money. Credit-builder loans are great for building credit, but not for borrowing money. You’ll also pay monthly interest, which is less than ideal.

Secured Loans

You can open some installment loans and credit cards by using collateral, such as your car or a security deposit. This gives the bank more confidence to give you a chance, because if you default on your loans it can use your collateral to pay your debt.

Cosigned Loans

If you’ve got a friend or family member with good credit that trusts wholeheartedly, you can ask them to cosign the loan with you. But again, they’re ultimately the ones responsible if your bill isn’t paid. If you’re irresponsible with your credit, you could take their score as well as your own.

You can often find all of these options at moderately-sized banks and credit unions.

You may also consider peer-to-peer loans which allows you to borrow money without being beholden to a bank. Credit requirements can be more flexible for these loans.

What To Watch Out For

It’s true that beggars can’t be choosers — but just because you can qualify for a loan doesn’t mean you should open it. Some terms are red flags that can be a booby trap to your finances.

For example, some loans that are targeted toward subprime borrowers may charge over 35% APR. With rates that high, you could quickly find yourself unable to dig yourself out of debt because you’re paying so much interest.

Also beware of hidden fees or penalties. Some loans charge processing fees, early repayment fees, excessive origination fees, or other junk fees that may not be clearly stated at first. These are routine among unlicensed and scam lenders. Just don’t do business with them.

You should also do everything in your power to avoid payday loans and title loans. They’re high-stakes loans that often charge unbelievable APR. Oftentimes, if you don’t pay off a payday loan within a couple weeks, you could be zapped with 300% APR or more, with your case quickly handed to a debt collector. And a title loan allows the lender to sell your car if you can’t make payments.

It’s also worth noting that neither payday loans or title loans generally help you to build credit.

Pros and Cons of Getting a Loan With No Credit 

Pros: 

• Access to emergency funds 
• Builds your credit history 
• Can qualify with income or collateral

Cons: 

• Higher interest rates
• Fewer lender options 
• Risk of falling into debt or getting scammed

How To Build Credit After Getting a Loan

Once you’re approved for a loan, you’ve got a golden opportunity to build your credit. That way, you’ll more easily qualify for a loan the next time.

If you can help it, choose a lender that will report to the major credit bureaus, namely, TransUnion, Equifax and Experian. If it reports to at least one, you’ll build credit — but if it reports to two or three, that’s even better.

Good To Know

The most meaningful action you can take to build your credit is by paying your loan on time every single month. Payment history alone accounts for 35% of your credit score. It’s the weightiest factor.

You can also track your credit progress with free credit score tools. Many banks, credit unions and credit cards offer a monthly credit score for free, allowing you to monitor your score to see how you’re doing and inform you of changes you can make to better cultivate your credit profile.

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