Getting a personal loan with no credit history can be difficult, but it’s not impossible. Here are a few steps you can take to improve your chances of getting approved for a loan.
Start with a secured loan or credit card
Secured loans or credit cards require a security deposit, such as a guaranty on your home or an up-front payment from your bank account. This extra security can help your loan approval process because it shows you have enough money to repay the loan.
Consider a peer-to-peer loan
Peer-to-peer loans are made between two individuals who know each other. This type of loan is often less expensive than traditional loans, and it’s sometimes easier to get approved because there is less paperwork involved.
Talk to a credit counseling service
Credit counseling services can help you improve your credit score, making it easier to get approved for a personal loan with no credit history.
Offer collateral to your lender
If a secured loan or credit card isn’t an option, consider offering some sort of collateral to your potential lender. This could include a second mortgage on your home, the title to your car, or an investment portfolio.
However, offering collateral requires you to speak with a loan officer, as many standard online applications won’t have this as an available option.
Look for lenders that specialize in personal loans for low-or-no credit scores
Some lenders specialize in lending to people with low credit scores. This could make it easier for you to get approved for a personal loan without a credit history. However, you need to be aware that these lenders will typically offer loans with higher interest rates and predatory terms, so you’ll need to stay on top of paying your loan off quickly.
4 quick ways to build your credit history fast
Building a good credit history is essential not only for your financial stability but also for your ability to borrow money in the future. There are many ways to build your credit history fast, and each has its own benefits. Some of the most common ways to improve your credit score include the following:
- Pay your bills on time. This not only demonstrates responsible financial behavior but is the most significant factor that credit bureaus use to determine your credit score.
- Keep a clean credit history. This means no derogatory information on your reports, such as past account closures or missed payments.
- Use a credit monitoring service. This will help you track your progress and make sure that your credit report remains clean.
- Get a secured credit card. This will help you build your credit history by borrowing money from a lender in return for a security deposit or mortgage loan.
The bottom line
There are many ways to improve your chances of getting approved for a loan. By starting with a secured loan or credit card and considering a peer-to-peer loan, you can get the financing you need without worrying about your credit score. In addition, credit counseling services can help you identify and fix any mistakes on your credit report that may be holding you back from obtaining a loan.