Sometimes you need money to cover an unexpected expense (like a big medical bill) or to prevent a small issue from causing larger ones (needed car repairs). If it absolutely can't wait, a small loan could be the answer to your financial prayers—but can you get one if you don't have a credit history? Show
It's possible to get a small loan without having a credit history, but you may be hit with higher-than-normal interest rates and unfavorable loan terms. Here's what you need to know to get a small loan even if you have no credit. Why Don't I Have a Credit Score?Not having a credit score doesn't necessarily mean you have bad credit. It simply means the credit bureaus don't have enough information about your credit history for a credit score to be assigned. Perhaps you don't have any credit accounts, or you only have one or two and are deemed to have a thin credit file. Common reasons you might not have a credit score include:
Can I Get a Small Loan if I Don't Have Credit?Most small loans are personal loans. As of Q3 2021, the average personal loan balance was $17,064, according to Experian data. You can generally get personal loans for as little as $1,000. While auto loans and mortgage loans are designed for specific purchases, a personal loan can be used for just about anything you want. Unlike a car loan or mortgage loan, which uses the car or house itself as collateral, personal loans are usually unsecured, meaning you don't have to put up any collateral. This makes your credit score even more important. Although you may be able to get a personal loan with no credit, lenders will probably charge you higher interest rates than they would if your credit was good. How can you prove that you're creditworthy without having a credit score? Look for lenders that consider other factors not included in your credit report, such as your employment history, income (from pay stubs or tax returns), bank account balances and debt-to-income ratio. It's often easier to get a personal loan from a credit union than from a bank. Because educating and supporting members in managing their finances is part of a credit union's mission, credit unions tend to be more flexible about their loan criteria. To apply for a credit union loan, you need to join the credit union, generally by opening an account and making a deposit. Types of Loans to Consider
Types of Loans to AvoidTwo other types of small loans—payday loans and title loans—are easy to get with no credit, but both should be avoided. Many states restrict or forbid these loans.
Where to Apply for Small Personal LoansYou can apply for small personal loans at banks, credit unions or online. Begin by investigating which lenders offer personal loans with small minimum amounts. You may want to start with your current bank or a credit union you belong to. Experian's CreditMatch™ tool can help you find prospective sources of personal loans. Once you narrow down your options, it's time to apply. You may have to make a call or pay the lender an in-person visit at some point in the process, but most lenders let you at least start the application process online and get prequalified for a loan that way. Prequalification provides you with estimated loan amounts, costs and terms you can use to compare lenders and doesn't affect your credit score. Some lenders don't require a credit check or they'll use alternative data to help them determine your loan eligibility. Once you find a lender you like, you can move ahead with the application process. You'll need to provide personal data (name, address, birthdate and Social Security number) to apply for a loan. You may also have to submit tax returns, pay stubs, bank account numbers and other personal financial information to help a lender understand your income and existing debt obligations. Different lenders also might consider additional factors; including your standardized test scores, which college you attend/attended, your major and your grade point average. When comparing personal loans, look at the following factors:
You can use Experian's Personal Loan Calculator to compare different loan terms and costs, calculate your monthly payment and decide which loan is best for you. How to Establish Credit if You Have No Credit HistoryEven if you are able to secure a small loan with no credit, it's extremely important to establish and build a credit history. Down the road, you'll likely want to apply for more credit to accomplish other life goals, such as buying a car or a house. Having a credit history will make it easier to get approved for these loans. Try these tips to establish credit for the first time.
Alternatives to Small Loans When You Don't Have CreditIf you don't have a credit history, applying for a personal loan isn't your only option. Here are some other alternatives for getting the money you need.
Getting Money With No CreditEven if you don't have a credit history, there are ways to get a small loan to cover sudden financial needs. The key is to look for lenders that focus less on your credit score and more on other factors, like your income or your job. But even if you do get a loan, not having credit may mean paying higher-than-normal interest and accepting unfavorable terms. By monitoring your credit report and taking steps to build your credit history (including paying off that small loan), you can help ensure future loans are easier to get. Can you get a loan if you have no credit?Yes, it's possible to obtain a personal loan without a credit history. That said, you may be faced with higher interest rates and unfavorable loan terms, especially when applying for an unsecured loan.
What is the easiest loan to get approved for?The easiest loans to get approved for are payday loans, car title loans, pawnshop loans and personal loans with no credit check. These types of loans offer quick funding and have minimal requirements, so they're available to people with bad credit. They're also very expensive in most cases.
Is it hard to get a personal loan with no credit?Because personal loans might be based on creditworthiness, having no credit can make it more difficult to get approved. And available loans may come with higher interest rates, which can increase borrowing costs.
How to get a loan with no credit or cosigner?Adam McCann, Financial Writer. How to get a personal loan with no credit and no cosigner:. Get a secured personal loan. Your credit, or lack thereof, doesn't matter as much when you put up collateral to secure a loan. ... . Take out a credit-builder loan. ... . Use your home equity. ... . Borrow from someone you know.. |