When you move into your first apartment, it can be one of the happiest moments of your life. You’re finally free from your parents’ house, and your parents’ rules. You’re ready to live by your own code, in your own space. You’re going to need furniture, but you probably don’t have a lot of your own money yet. What’s worse, you haven’t had time to established a solid credit history, so you can’t get a credit card with a high enough limit. Your only option is to find furniture loans with no credit history required.
This is the situation that many young adults, and even some older folks, find themselves in. As the reality of the adult world sets in, they come to find that living isn’t cheap, and credit rules all. Without a solid credit history, they find that they’re often denied credit cards, loans, and even some apartments. It makes life much more difficult.
If this sounds like you, I feel your pain, but don’t despair. There are options out there for you to get access to the money you’ll need to buy furniture and all of your other home needs. In the following paragraphs, I’ll give you five great tips that you can use to make finding a great loan easier.
Prove You’re Financially Responsible
The main reason that not having a credit history makes you unappealing to lenders is that you are a risk. Without an established history to demonstrate that you can successfully manage money, all a lender really has to guarantee that you’ll pay back your loan is a contract and your word. Unfair as it seems from where you’re standing, you can’t fault them for that.
So the obvious solution is to prove to them that you can be responsible with money. While credit history is the method that lenders prefer to validate this, it’s not the only option.
If you have paid or are paying alternative credit sources, these can qualify as verification of your financial responsibility. For example – apartment leases and utilities are recurring charges that you have to pay each month. So long as you’ve been successful in paying these on time each month, they can serve to strengthen your case with potential lenders.
Contact your rental agency and utilities provider and have them send you a signed letter, with their official seal, that verifies you are in good standing. You should also print off the account history with your apartment and utility companies to show that you’re current on your payments.
This will go a long way towards establishing your credibility with lenders and help set you up to successfully take out your very first loan.
Offer to Make a Larger Down Payment
The biggest risk that people without a credit history represent to lenders is that they won’t repay their loan. Credit scores are an indicator of risk. Since you can’t instantly generate a credit score, your goal is to eliminate any doubts a potential lender has that you’re committed to repaying your loan.
One effective way to do this offer to make a larger down payment on your loan. Since the primary goal of lenders is to get all of their money back, with interest, getting a sizeable chunk of it up front will be very appealing.
There’s no set amount that qualifies as a ‘good’ downpayment. Rather, it’s whatever you can reasonably afford that the lender is willing to work with. I would suggest starting at around 10%, and if the lender won’t accept that, be prepared to go up to 20%.
This is also a great tactic to use if you only have limited credit experience and are still being denied for a loan.
Prove you Have a Steady Source of Income
In lending circles, the term capacity refers to a person’s ability to afford a loan. It’s a combination of both income and your DTI or your debt-to-income ratio. Lenders want to see that you both have a steady source of revenue and that you’re not already obligated to spend most of it.
When you’re trying to find a loan without a credit history, prove to lenders that you have both a steady job and a low debt threshold. Provide copies of your bank statements and pay stubs to potential lenders. This will prove that you’re employed, and show them where your money’s going. Since bills like gas, groceries, utilities, and credit card balances don’t qualify under DTI, you only have to worry about expenses like apartment rent, car payments, and student loans.
Depending on the amount you’re requesting, this may be sufficient to convince a lender to work with you. Obviously, if you’d like to borrow more, you’re going to need a more sizeable income before lenders will consider you.
Split Your Costs
For lenders, the less a person borrows, the less risk for a substantial loss there is. It’s much better to lose $100 than it is to lose $1,000. For that reason, lenders are much quicker to loan to people without credit if they’re only borrowing small amounts.
You can use this same tactic yourself when you’re trying to access a loan without a credit history. Rather than trying to pay off all of your furniture with a loan, use it to pay for a smaller portion. If your furniture costs total around $2,000, fund anywhere from $500 to $1,000 with a loan. Use other revenue streams to pay off the remaining balance.
This might require that you only buy a few pieces of furniture at a time. Since you’ll have to pay back any amount that you borrow, you may need to divert your funds into your loan repayments. This will delay you buying more furniture. Once the loan is paid off, you can finish your purchases, or get a new loan.
Seek Out Credible Lenders Who Provide No Credit Loans
While you need to be cautious, as there are numerous scam artists who advertise loans, “Made for people with no credit!” this is the most direct option to get you the money you need to buy your household goods.
Your best option to find a good lender who will work with no credit is to use resources that provide multiple loan options at once. That way, you can compare the different lending options yourself, ask questions before you commit, and most importantly, look elsewhere if you can’t find what you’re looking for.
Now, as I said, you do have to be careful to avoid lenders who will either scam you or take advantage of you. Common signs of these types of lenders include very short repayment windows (a month or less); excessive interest rates (above 25%); advance fees or security deposits before you’re ready to close on the loan; the requirement to surrender the title to your car or home to secure the loan.