MoneyLife

How To Get a First Time Loan With No Credit

By Anna Yen

Are you in the market for your first loan, but can’t secure one because you don’t have a credit history? If this sounds like you, you’re not alone. 

In a pinch, new borrowers might be able to access high-interest options. Unfortunately, these come with a very real cost, sometimes to the tune of hundreds of dollars. However, you can find plenty of affordable loan alternatives out there, such as getting a co-signer, secured credit cards, or credit builder loans.

Can you get a loan with no credit history?

You can get a first-time loan with no credit history – but there’s a catch. 

If you borrow alone, lenders may charge higher interest rates to recoup their losses if you bail. Or you may have to loop in a qualified co-signer to ease your lender’s concerns (and hopefully net a lower interest rate).

However, these aren’t the only ways to get a first-time loan with no credit. 

Loan options you should avoid

Of course, not all loans are created equal. Some lending practices may seem like a great deal upfront, but they’re often riddled with fine print and extra fees. Here’s what you need to know about these not-so-savory borrowing options. 

Payday loans

With a payday loan, you borrow a small amount – usually less than $500 – and repay it from your next paycheck. 

Unfortunately, these short-term loans usually come with several downsides:

  • Very high-interest rates – can be 400% or more!
  • High fees and service charges 
  • Short term loans can be confusing, leading you to underestimate charges and rack up interest

Buy here, pay here loans

Car dealerships often promote so-called “BHPH” tactics as convenient, in-house financing. What they don’t tell you is that these “no-credit-check” options can come with interest rates up to 20% – often on heavily used, low-value products. And if you miss a payment, you risk not only a ding to your credit score but repossession too. 

Peer-to-Peer

Peer-to-peer lending is what it sounds like: you borrow money from another person, rather than a lending institution. Unfortunately, P2P loans offer no safety guarantees and can have higher-than-average interest rates. 

Plus, if you borrow from someone you know, you risk ruining your relationship if you default. 

Title loans

Title loans are a type of secured loan where you offer something valuable as collateral. In this case, you hand over your car title in exchange for cash. 

Unfortunately, title loans typically have high interest rates – up to 300% APR – and a short-term repayment period. And if you can’t pay back your loan, the company could take ownership of your vehicle, leaving you worse off than before. 

Loan and credit building alternatives

Now that we’ve taken a look at some of the unsavory lending options, let’s look at other – and healthier – ways to build your credit on a first-time loan. 

Credit Builder Loans

Some loans take a while to put money in your hands. If you need cash now, a MoneyLion Credit Builder loan, available through a Credit Builder Plus membership, can get the funds to you today. Plus, a Credit Builder membership account costs only $19.99 per month and comes with perks such as:

  • No hard credit check1
  • Loan up to $1,000
  • Monthly credit history reporting to help you build credit2
  • Credit monitoring tools to keep a handle on your finances
  • 0% APR Instacash cash advances to float you through those tough times

Secured credit card

A secured credit card works like a credit card in reverse. Instead of racking up debt and paying it down, you deposit a set amount – say $500. Then, you can make up to $500 worth of purchases using your card. 

Secured credit cards offer a lower-risk method to build credit and control your spending. However, they also come with lower lending limits. They also may have additional fees and higher interest rates due to less market competition. 

Establishing credit as an authorized user

Becoming an authorized user doesn’t nab you a loan, per se. But it does provide a way to build credit for future borrowing. 

The way it works is easy: a primary account holder – such as a parent – adds you as an authorized user. Then, you can make purchases with a card issued. 

As an authorized user, you’re not required to make payments on the account. However, if the primary account holder misses a payment, your credit takes a hit, too. 

Military assistance

Various organizations and nonprofits, such as the PenFed Foundation, offer no- and low-interest loans for active or former military members. The requirements, rates, and terms vary among institutions, so be sure to do your research before signing up with any organization. 

Get a personal loan with co-signer

Personal loans are unsecured loans with few spending restrictions. This makes them an attractive proposition – but because they’re unsecured, those with no credit have a hard time getting one. 

But if you bring a cosigner to back your debt, you can unlock lower interest rates and higher loan amounts. However, if you default on the payment, you risk not only your credit score but your cosigner’s, as well. 

Installment loans

Installment loans are debts that you pay back on an installment plan, instead of in one chunk. Personal loans fall into this category, as do car payments and mortgages. If you’re a young adult, installment loans – particularly student loans – may be your introduction to building credit. 

Get up to a $1000 loan today, no cosigner needed! 

Getting a first-time loan with no credit doesn’t have to be a high-interest endeavor. Instead of using predatory lenders such as payday loans or buy here pay dealerships, you can opt for a lower-interest, lower-risk option such as a secured credit card or a cash building loan. 

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