There are many financial sites that will tell you having a cosigner is essential if you have bad credit and need a loan. While I’ll admit it can make the process easier, it also carries a lot of risks that you may want to avoid. That may leave you wondering how to get a personal loan with no credit and no cosigner.
Many loan shoppers ask themselves, “Can I get a loan without credit?” especially if they’re not planning to have a cosigner. The good news is that you can. In fact, there are more people with poor to no credit being approved than ever before. Experian Automotive reported that lenders are approving 11.4% more bad and no credit car loans than in the past few years.
The bad news is that it can still be tricky to find those loans. If you’re opting not to use a cosigner, it becomes even more complicated. With this guide, we’ve put together some points to help make your search for personal loans for no credit history and no cosigner easier.
Build Your Credit First
This may seem like I’m not addressing what you’re trying to achieve, but trust me: this is the best answer to the question of how to get loans with no credit.
If you’ve got time before you need the money, you should look at building your credit first. Not only will this help you get better lending terms, but it will also set you up for a healthier financial future. There are several ways you can start building your credit:
Get a Credit Card
Taking out a credit card is the most common way that people start building credit. There are credit cards designed specifically for people who are looking to build credit. If you already have a card, you can consider taking out a second one to increase your credit limit. This will help keep your credit utilization low.
Be careful taking out too many new cards at once. Hard credit inquiries affect up to 10% of your cumulative credit score. Each new hard inquiry can bring down your score anywhere from 2 to 10 points. Wait anywhere between four to six months before you apply for a new card.
Become an Authorized User on Someone’s Credit Card
An authorized user is a person who can use someone else’s credit card freely. If you don’t qualify for a card of your own, look to use someone else’s credit card. Your parents, your spouse, and potentially your best friend could all be good candidates to let you use their card.
Forbes recommends this as their preferred option for people looking to build credit. They prefer it because it allows you to use someone else’s credit history as your own. It means you don’t have to wait for your own history to accumulate before you can start applying for credit cards and the like.
Use Alternate Data Points In Lieu of Credit
In addition to credit cards, you can potentially use other pieces of data to start generating a score. Anything that shows that you’ve met your financial obligations might qualify, and some examples include:
- Cell phone payments
- Utility payments
- Student loan repayments
- Rent payments
If you’d like the credit bureaus to starting building your history faster, reach out to them and see if they’re willing to accept your bills as a form of credit history.
Convince a Lender to Work with You
If you don’t have time to wait until your own credit is established, then you’ll need to find a lender willing to offer personal loans for someone with no credit. The catch is that there are many lenders who will offer you money, but take advantage of you.
If you’re finding yourself turned away by most lenders and wondering how to get a personal loan with no credit, here’s what you can do:
Collateral is anything that you offer the lender to secure a loan. Common examples include your vehicle or your house. Other types of collateral may be accepted, depending on the lender’s preference.
I can’t personally recommend this option because the risk of losing your valuables so great, but you deserve to be aware of any potential option.
Show the Lender that You’re Not a Risk
Credit scores exist to quantify how risky you are from a financial perspective. Without a credit score, lenders can’t determine how much a risk you’ll be as a borrower. That makes them nervous. One possible workaround is to use other data besides credit to prove that you’re responsible.
I mentioned before that you can use alternate data to help generate a credit score, and you can use this same data to sway some lenders. If they’re willing to consider it, provide copies of your account histories for your rent, utilities, cell phone, and other recurring bills. This will help establish a history of payments made on time, even if they’re not reported to the credit bureaus.
Additionally, you should consider any testimonials that can establish your trustworthiness. A letter from your rental agency, your utility company, and even your employer endorsing your character can go a long way towards establishing trust with a lender.
If you’re struggling with how to get a loan with no credit, this may be the best option for you.
Agree to Stricter Lending Terms
While it’s not ideal, you may be able to convince a lender to work with you by agreeing to stricter lending terms. This will obviously place more hardship on you, but it may be the only feasible option you have to get a personal loan with no cosigner through a normal lender.
For example, you could volunteer to pay a higher interest rate on the loan. You could also consider offering to pay off your loan faster with higher monthly payments.
Find a Specialty Lender
If you find that a normal lender isn’t willing to work with you, then you may need to consider a specialty lender. Often times, these lenders who offer no credit personal loans will provide you with the best deal you can get without a score.
While you may not receive the terms that a high credit score would afford you, many of these lenders are experts in providing a personal loan without a cosigner. They’ve been in business long enough and helped enough people that they can offer loans that are very manageable, even if they’re not the best on the market.
Even with these types of lenders, you still need to take the time to shop and compare numerous options to ensure you’re getting the best deal possible. Check APRs, loan repayment timelines, loan limits, and all of the other factors you would for any other type of loan.