What loan options are available if I have no credit?
Let's say you find yourself in a pinch and need to get a personal loan with no credit. Qualifying for emergency loans without a credit score is not easy, but it is possible. To get a loan with no credit, it pays to know your options.
Below, we'll talk about how these options can help you get a loan with no credit:
- Online lenders
- Banks and credit unions
- Cosigner
- Collateral (secured loans)
- Paycheck advances
- Personal loans for bad credit
- Credit-builder loans
- Family and friends
Online lenders
Some online lenders cater to borrowers looking to get a loan with no credit by weighing other things. They might look at where you attended college, your major, and grade point average.
Banks and credit unions
If your credit history is practically nonexistent, you may be surprised by your ability to get a bank loan with no credit through your home bank or credit union. As long as you have an established relationship, a bank or credit union can easily pull up your account to check things like how regularly you make deposits, if you spend more than you bring in, and generally, how responsibly you handle your account.
Cosigner
A cosigner with a strong credit score improves your odds of being approved for a loan but it's not guaranteed. It also increases the likelihood you'll score a low interest rate and attractive repayment terms. Plus, each on-time monthly payment helps you build a positive credit history. Only get a loan with a cosigner if you're sure you can pay it back: if you miss a monthly payment, your cosigner's credit will suffer.
Collateral (secured loans)
There are two types of personal loans: secured and unsecured. A secured loan means that you promise to give the lender something you own (an asset) if you can't pay the loan. This is known as "pledging collateral."
It's usually easier to qualify for personal loans without credit if you can offer collateral.
Collateral may be anything of value, for example: a retirement account, a car, a savings account, or jewelry.
Paycheck advances
Some employers offer paycheck advances. These are loans repaid through deductions from future paychecks. Often, these programs are run through third-party lending companies and offer all employees the same interest rates and terms -- regardless of their credit scores.
If you need to get a loan with no credit and your employer offers a paycheck advance, it can benefit you in two ways:
- You'll get the loan you need when you need it.
- It can help build your credit score.
Before you take out a loan, make sure you understand how much it's going to cost you in interest and fees. Also find out about repayment terms and make sure you can afford the monthly deduction from your paycheck.
Personal loans for bad credit
As we mentioned, having a thin or nonexistent credit score is not the same as having a bad credit score. Still, lenders willing to take a risk on borrowers who need to get a loan with no credit are often the same lenders who take a risk on borrowers with poor credit.
Personal loans for bad credit give you the opportunity to make full, on-time payments that will raise your score. Just watch out for interest rates -- rates on these loans can be on the high end.
Credit-builder loans
To get a loan with no credit you may want to look into a credit-builder loan. With a credit-builder loan, you apply and are approved for a small loan. You make payments on the loan, including interest, and those payments are reported to the credit bureaus. It's only after all payments are made that you have access to the money you borrowed.
A credit-builder loan is a good option if you're trying to build credit. It's not a good option if you need money right away.
Family and friends
It will come as no secret to your family and friends that you'll need help to get a loan if you have no credit. They'll understand if you haven't had time to build a credit history. If you find yourself in an emergency situation, ask for help from those who care about you.
If they agree to lend you money, treat it as you would any loan. Write up an agreement outlining:
- How much you're borrowing
- How often you will make a payment
- How much the payment will be
- When the loan will be paid in full
Social assistance
If you're struggling to pay the bills, look into available social assistance. You might be surprised at what you qualify for. Some places to start:
- SNAP benefits
- Housing assistance
- State welfare
- Local food banks (some don't have income requirements)
- The Children's Health Insurance Program
If you're renting, ask your landlord about rent relief. Some landlords are willing to move the date rent is due, delay this month's rent to next month, or offer rent relief in exchange for help around the property (like landscaping, office work, or cleaning).
And if you own your home, ask your mortgage lender about forbearance. If you're facing financial hardship, you may qualify for mortgage forbearance, which means you won't need to make mortgage payments in the short term. Long-term impacts of this decision vary by lender, so make sure you understand the details of what you're agreeing to.
Is a no-credit-check loan a good idea?
Payday loans and title loans are types of no-credit-check loans. It's usually best to avoid these loans, but if you're out of financial options, a no-credit-check loan could help you make ends meet.
The best way to approach a no-credit-check loan is to make paying it off your first priority -- even before paying off credit card debt. No-credit-check loans often charge 400% or more in interest. They're extremely expensive compared to credit cards and other alternatives.
Let's say you need to fill a prescription, but payday is still a few days away. Going without a prescription can be dangerous, so you take out a payday loan to fill the prescription. Then, you pay it back when your paycheck is deposited.
Be careful: No-credit-check loans trap some people in a cycle of borrowing. In this situation, the borrower can't afford to pay off their payday loan, so they take out another payday loan to pay off the first one. If you can't pay off your payday loan in cash, look into other ways to pay it off, like:
- A balance transfer credit card
- Credit card payment (if the lender accepts it)
- Paycheck advance
- Any of the other above alternatives
This can help you avoid being trapped into paying the extreme interest rates of a payday loan.
