How to Get a Personal Loan With No Credit History

man handing another man money after he applied for a personal loan with no credit

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You may be looking for a personal loan to pay for an expense you recently had or one that might be coming up, but you don’t have a credit history. Fortunately, you do have options. 

In this article, we’ll discuss how to get a personal loan with no credit, including alternatives if you’re unable to get the loan that best suits you.

Let’s jump right in.

What is a Personal Loan?

A personal loan is money borrowed from a bank, credit union, or online lender that you repay in fixed monthly payments. Personal loans are generally paid back between two and seven years.

While it’s generally a good idea to use your own money for spending needs, a personal loan can be used for both discretionary spending as well as things such as consolidating debt.

What Does It Mean To Have No Credit?

Your credit history is a track record of how well you take care of your debts, including repaying your loans and credit cards. Your credit history is used to determine your credit score, which is an indicator of how likely someone is to repay future debt.

When you have no credit history, creditors don’t have an easy way of determining whether you’ll pay back a loan. In this case, you may not have a credit score at all.

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Here are some reasons why you may not have a credit score:

  • You’ve never applied for a loan before.
  • You have no recent activity on their credit history. Credit history with no activity for two years is considered stale, which could affect your credit score.
  • You might have recently immigrated to the U.S., causing you not to have a credit score.
  • Your first account was opened too recently.

The Consumer Financial Protection Bureau (CFPB) calls this “credit invisible,” and this accounts for approximately 26 million people in the U.S. or 11% of the adult population.

If you’re credit invisible, you still have options for getting a personal loan.

Can I Get a Personal Loan No Credit?

Yes, getting a personal loan is possible if you don’t have a credit history. With that in mind, your options may be less favorable. You may have to pay higher interest rates, for example.

Personal loans are typically unsecured loans, and when you have no credit history, you pose a risk to lenders, as they can’t easily determine how likely you are to repay your loan.

Unsecured loans don’t come with collateral, which adds an additional risk to lenders.

That said, you can still get a personal loan. Consider your options when applying to different lending companies and determine which loan has the most favorable terms.

How Can I Get A Personal Loan With No Credit?

Consider the following methods to get a personal loan if you have no credit. You may have to search around to find the best option.

Check Online Lenders

Online lenders sometimes have looser loan restrictions and may lend you money based on other factors, such as your college degree and how well you did in college.

Go to a Bank or Credit Union

If you have a well-established account with your local bank or credit union, they may be willing to lend you money. Sit down with someone from your local bank to discuss options. 

They may look at how often you deposit money, how much you deposit, and how much you spend or withdraw to help make their decision.

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Get a Cosigner

You may consider having a friend or family member cosign the personal loan. When you use a cosigner, the lender considers the credit history of the cosigner, which can improve your ability to get approved, as well as the ability to get a lower interest rate or more favorable terms on your loan.

Note: If you fail to make a payment on your personal loan, your cosigner will be responsible for the payment, and their credit score can suffer for your missed payment. Make sure you can pay back your loan when you use a cosigner, as hurting your cosigner's credit score or causing them to be responsible for repayment could damage your relationship with them.

Take Out a Secured Loan

A secured loan is when you put up an asset as collateral that the lender can repossess if you fail to repay your loan. 

An asset can be anything of value, such as an automobile or jewelry. For some secured loans, you may need to transfer the asset to your lender until the loan is repaid in full.

Secured loans are typically easier to qualify for than unsecured loans, which makes this an option that may be worth pursuing if you have no credit.

Look Into Personal Loans for Bad Credit

Having no credit and having bad credit are different things, but you might be able to qualify for a loan as if you have bad credit. With that in mind, a lender may offer you a personal loan for bad credit individuals. 

Be aware that personal loans for bad credit individuals often come with much higher interest rates, and their terms may be less favorable. That said, this can still be an option to look into.

Consider a Credit-builder Loan

A credit-builder loan differs from a traditional loan in that you pay money to a lender each month for a specified period. At the end of the term, you receive access to your loan. In this case, it’s like you put money aside each month and then received your money back.

Credit-builder loans can help you improve your credit score when you don’t have any credit history, which might be right for you if you don’t need money immediately.

Get Your Free Credit Score With Credit Karma

Credit Karma offers free credit scores, reports, and insights.

Get curated offers based on your credit profile to find credit cards, loans, and more.

Affiliate Disclosure: This is an affiliate link, and we may earn a small commission if you click and make a purchase. This helps our site grow and provide you with more content. Read how we make money here.

Borrow From Friends and Family

If you can’t get a personal loan from a traditional lender, you may consider asking a friend or family member if you can borrow money from them.

As money can strain relationships, it’s key to write down the terms of the loan with your friend or family member that’s lending you the money. You should both agree on the amount loaned, the repayment schedule, and how much interest, if any, is on the loan.

Types of Loans to Avoid When You Have No History

There are two types of loans that you should consider avoiding when you need money and have no credit history.

Payday Loans

A payday loan is a very high interest short term loan that you generally pay back when you get your next paycheck.

These loans can have interest rates of 400% or more and can trap you in an endless cycle of debt if you use them.

Pawn Shop Loan

Pawn shop loans are when you put up an asset with a very high value while taking out a small loan. You may face high interest rates for this type of loan and could lose your valuable asset if you fail to pay back the money you borrowed.

How to Get Credit With No History

Here are two ways that you can build credit history by using credit cards.

Apply for a Credit Card

Some credit cards are designed for people with bad credit or no credit. A secured credit card, for example, may be right for you to build your credit history. A secured credit card is when you deposit money into an account, and that money is used as collateral against your credit card.

Become an Authorized User

When you’re an authorized user of someone else’s credit card, you can use their credit card as if it were yours. When the cardholder keeps up with payments, your credit score improves, and you build credit history with a card that you are an authorized user of.

Wrapping It Up

While getting a personal loan without credit can be challenging, it’s certainly possible. Read the terms of any loan that you’re considering taking, and be sure you understand how the loan works and if it suits what you're looking for.

If you need a personal loan right now, check out Upstart. 

You can get your rate on Upstart in just a few minutes.

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