Can I get a loan without credit?
Technically, it is possible to get a loan without a credit score. But if you try to get a loan with no credit score, you may end up with a high interest rate and less than favorable terms. Your lack of credit scares lenders. The tool they would normally use to judge whether or not you are likely to repay the loan (your credit rating) is either nonexistent or too thin to tell them what they need to know.
Here are some reasons why you might not have a credit score:
- You’ve just entered adulthood and haven’t had the time or opportunity to build a credit score.
- You haven’t used credit in the past two years. Lack of activity puts an end to the information needed to generate an accurate score.
- You are a recent immigrant, new to the United States, and need to build a credit score from scratch.
Not having a credit score is not the same as having a bad credit score. When someone tells you that you don’t have a credit score, it just means that there isn’t a clear record of how you are behaving as a borrower. Personal loans for people without credit are borrowing options specifically designed for borrowers who do not have a long credit history.
It can be difficult to get a loan without credit. Even if you have credit, the credit score required for personal loans can be a bit confusing. Whether you want a car loan, a loan to finance a new swimming pool, or a personal loan to help deal with an emergency, a good credit rating is the key to opening the door to credit.
What loan options are available if I don’t have credit?
Let’s say you find yourself in a tough spot and need to get a no credit personal loan. Qualifying for emergency loans with no credit score is not easy, but it is possible. To get a loan without credit, it helps to know your options.
Below, we’ll explain how these options can help you get a no-credit loan:
- Online lenders
- Banks and credit unions
- Collateral (secured loans)
- Payday advance
- Personal loans for bad credit
- Constructors credits
- Family and friends
Some online lenders cater to borrowers who are looking to get a loan without credit by weighing other things. They might look at where you attended college, your major, and your grade point average.
Banks and credit unions
If your credit history is virtually nonexistent, you might be surprised at your ability to get a credit free loan from your bank or credit union. As long as you have an established relationship, a bank or credit union can easily open your account to check things like how often you make deposits, if you are spending more than you earn, and in general, with what responsibility you manage your account.
A co-signer with a good credit rating improves your chances of being approved for a loan. It also increases the likelihood that you will get a low interest rate and attractive repayment terms. Plus, every one-time monthly payment helps you build a positive credit history. Only get a loan with a co-signer if you are sure you can repay it: if you miss a monthly payment, your co-signer’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 that you own (an asset) if you cannot repay the loan. This is called the “pledge of guarantee”.
It is usually easier to qualify for a personal loan without credit if you can provide a guarantee.
The collateral can be anything of value, for example: a retirement account, a car, a savings account or jewelry.
Some employers offer payday advances. These are loans repaid by deduction from future paychecks. Often, these programs are run by third-party loan companies and offer all employees the same interest rates and terms regardless of their credit rating.
If you need to get a loan without credit and your employer offers you a payday advance, you can benefit in two ways:
- You will get the loan you need when you need it.
- It can help you build your credit score.
Before taking out a loan, make sure you understand how much it will cost you in interest and fees. Also learn 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 no credit rating is not the same as having a bad credit rating. Yet lenders willing to take a risk on borrowers who need to obtain a loan without credit are often the same lenders who take a risk on borrowers with poor credit.
With bad credit personal loans, you have the opportunity to make full and on-time payments which will increase your score. Just watch out for interest rates – the rates on these loans can be high.
To get a loan without credit, you may want to consider a loan on credit. With a builder loan, you apply for and get approved for a small loan. You make payments on the loan, including interest, and those payments are reported to the credit bureaus. It is only after all the payments have been made that you have access to the money you have borrowed.
A loan on credit is a good option if you are trying to create credit. This is not a good option if you need the cash right away.
Family and friends
It’s no secret to your family and friends that you will need help getting a loan if you don’t have credit. They will understand if you haven’t had time to build a credit history. If you find yourself in an emergency, seek help from those who care.
If they are willing to lend you money, treat it like you would any loan. Write an agreement outlining:
- How much you borrow
- How often will you make a payment
- How much will the payment be
- When will the loan be repaid in full
If you’re having trouble paying your bills, find out about available social assistance. You might be surprised at what you qualify for. A few places to start:
- SNAP Advantages
- Housing assistance
- State welfare
- Local food banks (some have no income requirements)
- Children’s Medicare Program
If you are a tenant, ask your landlord about rent relief. Some landlords are willing to move the rent due date, postpone this month’s rent to the next month, or rent relief in exchange for help around the property (like landscaping, renovations, etc.) office or cleaning).
And if you own your home, ask your mortgage lender about forborne. If you are facing financial difficulties, you may be eligible for mortgage forbearance, which means you won’t need to make short-term mortgage payments. The long-term impacts of this decision vary by lender, so make sure you understand the details of what you are agreeing to.
Is a Loan Without a Credit Check a Good Idea?
Payday loans and title loans are types of loans without a credit check. These loans are usually best avoided, but if you run out of financial options, a loan without a credit check could help you make ends meet.
The best way to approach a loan without a credit check is to make paying it off your first priority, before you even pay off the credit card debt. Loans without a credit check often charge 400% or more interest. They are 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: Loans without a credit check trap some people in a borrowing cycle. In this situation, the borrower cannot 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 with cash, look for other ways to pay it off, such as:
- A balance transfer credit card
- Payment by credit card (if the lender accepts it)
- Payday advance
- One of the other alternatives above
This can help you avoid getting trapped in paying the extreme interest rates on a payday loan.
The bottom line
Finding a loan without credit is neither fun nor easy. Obtaining a loan in this situation is however possible. If you are looking to get a no credit loan, browse through these recommendations, find the one that best suits your situation, and go for it. If you carefully manage the loan once it’s in your hands, you’re on your way to building a strong credit rating.
Still have questions ?
Here are some more questions we answered:
Loans and Credit Ratings