Do you need a loan but you have no previous history of credit? There are ways you can get no credit loans. Here’s how those types of loans work.
Personal loans went up in popularity by 11% between the year 2017 and 2018. That growth makes personal loans the fastest growing means of money borrowing in the United States!
There’s a reason why people love personal loans so much. They’re downright helpful.
Whether you’ve got medical bills to pay or a car to fix, personal loans are there to help you build a bridge past today’s adversity so you can get to a brighter tomorrow.
But what if you have no credit history? Are there still ways that you can get your hands on the money that you need?
Fortunately, even with no credit, you have options. A favorite solution in these situations is no credit loans.
No credit loans are loan products that are specifically targeted at first-time borrowers. Below, we outline everything you need to know about them and loans in general.
How the Loan Process Works
When a borrower needs money, they go to a lender and request whatever their needed amount is. That lender is typically a bank, credit union, or other professional lending institution.
Prior to approving a borrower’s loan request, lenders will look to answer a few questions about their prospective borrower to understand how much risk they’re taking by lending them money.
The first questions most lenders ask is, “Is this borrower over 18?”, “Does this borrower have a checking account?”, and, “Is this borrower a legal citizen?”.
After determining that basic eligibility, lenders will then look at what your income and credit score.
Your income is an important factor for lenders because they want to make sure that you make enough money to pay them back. Your credit score is also important because it tells lenders what your track record is with borrowing.
Not having a credit score to present to lenders brings us to our next big question…
What is a No Credit Loan?
Most lenders will not give you access to their standard suite of loan products if you have no credit score to share. Believe it or not, in some cases, having bad credit can be better than having no credit since lenders will at least have an idea of what products to offer you.
The good news is that many lenders have specialized loan products that are for people looking to start their career as borrowers. These products won’t consider your credit to determine your eligibility and are referred to “no credit loans.”
No credit loans are not without their quirks as you’ll see in a moment.
Types of No Credit Loans
Personal loans no credit check, as we alluded to, will likely carry some special requirements. Below are a few of the most common no credit loan types you may get offered by a lender.
Unsecured Loans With Average Terms
The best deal you can get on a no credit loan is an unsecured loan with average terms.
“Unsecured” means that your loan won’t require any property or “collateral” to be put up as insurance. That’s good news for you because it allocates more risk to the lender.
“Average Terms” means that terms surrounding your loans like fees, interest rates, and the amount of money you’ll be allowed to borrow will be average. What average entails will vary from loan to loan.
A co-signer loan can be a great no credit loan option if you know someone that’s willing to help you out. This type of loan will give you the ability to borrow money, sometimes with excellent terms, so long as you can get a friend or family member with good credit to sign your application alongside you.
When your friend or family member signs, they agree to be liable for your debt should you “default” (stop paying back what you borrowed).
The worst kind of no credit loan product you may be offered by a lender is a secured or “collateral-based” loan.
These loans will require that you put the title of your car, your next month’s paycheck, or another piece of property on the line as insurance that you’ll pay back what you’re borrowing.
If you pay back what you owe on time, your property will be safe. If you don’t, your lender can pay themselves back by liquidating your property.
Things to Watch Out For With No Credit Loans
There isn’t anything uniquely dangerous about a no credit check loan that you should be worried about.
As is the case with all loans, you should be careful about the interest rate and fees applied to your loan. High-interest rates and fees can skyrocket what you owe to a lender and can catapult you towards financial ruin.
Finally, for collateral-based loans, make sure that you never risk property that you can’t afford to lose.
Making No Credit Loans Work for You
No credit loans are harder to get than loans targeted at people with good credit. If you know where to look though, you can find a reputable lender that’s willing to work with your situation.
Remember to always pay borrowed money back on time.
The better you manage your loans, the better your credit will become, and good credit can unlock a number of opportunities for you!
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