How To Get a Loan With No Credit 

It's possible to get a personal loan with no credit. However, the pickings will be slim. You may need to offer some form of collateral or apply with a cosigner who has respectable credit. Here are some tips to make it a little easier.

MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

What Lenders Look for If You Have No Credit

A credit history is sort of like a performance report for your ability to handle credit. If you've got no credit history, the bank has a hard time assessing whether it's risky to lend you money. Although there are few lenders that will approve you for a loan without a credit check, some lenders will take other factors into consideration, including:

• Income and employment history: Do you have a stable job with sufficient income? A lender wants to see you're not out of work or prone to it, so this can go a long way toward approval.

• Payment history: Paying your credit card bill every month isn't the only way a lender can get an idea of what type of customer you'll be. Banks may look at the payment history of your utilities, rent, etc.

• Security: If the bank is hesitant to lend you money, it may ask for some sort of guarantee. This may come in the form of a refundable security deposit, an asset that you're willing to pledge or a cosigner who does have good credit.

Your most foolproof option will typically be to open the personal loan with a cosigner with excellent credit. The bank will factor their creditworthiness into its decision. Just know that if you can't make your payments, the cosigner is responsible for repaying the money.

Best Types of Loans for No Credit

The best types of loans for no credit are those designed for limited or bad credit history. This includes:

Credit-builder Loans

Some financial institutions allow you to open an installment loan without giving you the money upfront. Instead, as you pay off the loan, you'll receive access to your money. Credit-builder loans are great for building credit, but not for borrowing money. You'll also pay monthly interest, which is less than ideal.

Secured Loans

You can open some installment loans and credit cards by using collateral, such as your car or a security deposit. This gives the bank more confidence to give you a chance, because if you default on your loans it can use your collateral to pay your debt.

Cosigned Loans

If you've got a friend or family member with good credit that trusts wholeheartedly, you can ask them to cosign the loan with you. But again, they're ultimately the ones responsible if your bill isn't paid. If you're irresponsible with your credit, you could take their score as well as your own.

You can often find all of these options at moderately-sized banks and credit unions.

You may also consider peer-to-peer loans which allows you to borrow money without being beholden to a bank. Credit requirements can be more flexible for these loans.

What To Watch Out For

It's true that beggars can't be choosers — but just because you can qualify for a loan doesn't mean you should open it. Some terms are red flags that can be a booby trap to your finances.

For example, some loans that are targeted toward subprime borrowers may charge over 35% APR. With rates that high, you could quickly find yourself unable to dig yourself out of debt because you're paying so much interest.

Also beware of hidden fees or penalties. Some loans charge processing fees, early repayment fees, excessive origination fees or other junk fees that may not be clearly stated at first. These are routine among unlicensed and scam lenders. Just don't do business with them.

You should also do everything in your power to avoid payday loans and title loans. They're high-stakes loans that often charge a sky-high APR. Oftentimes, if you don't pay off a payday loan within a couple weeks, you could be zapped with 300% APR or more, with your case quickly handed to a debt collector. And a title loan allows the lender to sell your car if you can't make payments.

It's also worth noting that neither payday loans or title loans generally help you to build credit.

Pros and Cons of Getting a Loan With No Credit

Pros:

• Access to emergency funds

• Builds your credit history

• Can qualify with income or collateral

Cons:

• Higher interest rates

• Fewer lender options

• Risk of falling into debt or getting scammed

How To Build Credit After Getting a Loan

Once you're approved for a loan, you've got a golden opportunity to build your credit. That way, you'll more easily qualify for a loan the next time.

If you can help it, choose a lender that will report to the major credit bureaus, namely, TransUnion, Equifax and Experian. If it reports to at least one, you'll build credit — but if it reports to two or three, that's even better.

You can also track your credit progress with free credit score tools. Many banks, credit unions and credit cards offer a monthly credit score for free, allowing you to monitor your score to see how you're doing and inform you of changes you can make to better cultivate your credit profile.

FAQs

Can I get approved for a loan with just income and no credit?

Yes, you can get approved for a loan with just income and no credit. However, your options will be limited. Some lenders may advertise that they don't run a credit check and will focus instead on your income and employment history. These tend to come with high fees and steep APR. Alternatively, you can open a credit builder loan for the sole purpose of building credit — not borrowing money.

You can also open secured loans that require you to provide collateral. And payday loans generally don't require a credit check, but they're predatory.

Is it better to wait and build credit before opening a loan?

Yes, it is better to wait and build credit before opening a loan. With no credit history, you won't get the best interest rates, and you'll also be severely limited in the type of loan you can open.

Will getting a loan help improve my credit score?

Getting a loan will help you to improve your credit score as long as you make on-time payments and treat the loan responsibly. For example, you shouldn't borrow more than you can afford to pay back, and you shouldn't open it for a nonessential purchase that will get you into debt.

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