Loans for no credit
If you cannot get a loan without a credit history, then it is worth exploring alternatives such as secured credit cards and also look out for credit-builder loans to help you with credit building.
Each of us needs funding from time to time to cover urgent expenses such as medical treatment, emergency purchases, utility bills, and more. However, if you do not have a credit history then obtaining financing can be a problem as most lenders ask for a credit check. However, there are still several options that can help you get funding.
What are Loans for no credit?
Personal Loan is a type of financing offered by banks and credit unions as well as online lenders. This type of loan is often unsecured and allows the borrower to spend money to cover any personal needs. Thus, you do not need to provide a house or car as collateral in order for your loan application to be approved.
However, please note that each lender has its own requirements and credit conditions. Thus, some Personal Loans can be not only secured but also costly. Thus, study the offers of different lenders in order to choose the most profitable for you.
What is credit history?
Credit history is a kind of a list of loans that you took earlier and how you repaid your debts. Credit history helps lenders understand if you can pay off debt on time and how you dealt with debt in the past. Information about your loans is accumulated in your credit report. Your credit report can then be used to calculate your credit rating and the possibility of your loan repaying.
However, if a person has little or no credit history, this can significantly complicate the process of obtaining a loan, since the lender will not be sure that you will pay off the debt on time. It is also important to note that the lack of credit and bad credit are two different things that cannot be compared. However, why do some people have no credit history?
You may not have a credit history for a number of reasons. For example, if you have not previously applied for a loan or a credit card, then of course you will not have a credit history. Another common option is when a person moves from another country. Also, if there has been no activity on your credit accounts over the past six months, this can also affect your credit. Thus, there are many reasons why you do not have a credit history and you need to read them in more detail before applying for funding.
Can I get a loan with no credit history?
Often times, Personal Loans are approved based on your creditworthiness, so getting a loan without credit can be a challenge. Most often, you can find a lender who will provide you with a loan even without a credit history, but most likely he will offer you fairly high interest rates or unfavorable lending conditions.
Before applying, make sure that you can actually repay the loan, otherwise you will face penalties for late payments. However, if lenders offer prohibitively high interest rates then there is another option you can use - a co-signer.
A co-signer is a person (usually a friend or family member) with good or excellent credit who agrees to take responsibility for the loan and repay the debt if you cannot do it yourself. Of course, having a co-signer gives lenders an additional guarantee that the debt will be paid off. However, you must be sure that you can repay the loan in order not to let down the person who is ready to vouch for you. Thus, having a co-signer will help you get a better loan offer.
Alternatives that you can use if you do not have credit
Even if you cannot get a Personal Loan, you still have several financing options to help you cope with your financial hardships. Moreover, some of them will even help you build credit if you make regular monthly payments. Of course, you cannot build good credit in one week, as it is quite hard work. However, the sooner you start, the faster you can see the result:
- Secured credit card. Such a credit card is suitable both for people who want to build credit (for example, students or people who have recently moved from another country), and for people who want to rebuild one. A secured credit card allows you to pay for purchases within a specified limit and make monthly payments. If you do not pay on time, you will be charged interest on the balance. Also in order to get a secured card you must make a security deposit in case you cannot pay off the debt.
- Student credit card. If you are a student, you can get a student credit card to help you build credit so that you can borrow money for big purchases in the future. These cards work just like traditional credit cards.
- Credit-builder loans. Such loans differ from traditional personal loans in that they do not provide such quick access to money. Instead, the money is deposited into a secure account and the borrower must repay the amount over a specified period of time in regular installments. Typically, repayment terms range from 6 months to 2 years. Payment information is sent to credit bureaus. After the amount is repaid, the borrower can access the account.
It does not matter which path you choose, since the main thing is to take responsibility for money and make timely payments in order to look for good credit that will help you get profitable loan offers in the future.