How To Get a Loan With No Credit: Complete Guide

Yes, you can get a personal loan with no credit, though options are limited, it will cost more and you may need to get a cosigner or offer collateral.

Sometimes people confuse no credit with bad credit.

• No credit means you don't have a record of borrowing history

• Bad credit indicates negative history in how you manage your bills.

Key Takeaways

• Yes, you can qualify for a personal loan with no credit history, but expect higher rates and tighter requirements. Lenders will likely review your income, employment, bank cash flow and rent or utility payment history.

• Your best options include credit-builder loans, secured loans backed by collateral and co-signed loans. Typical APRs range from 7% to 36%, and funding usually takes one to three business days.

• Before you apply, prequalify with multiple lenders to compare rates, gather pay stubs and bank statements, and confirm the lender reports to all three credit bureaus so the loan helps build your credit.

Summary generated by AI, verified by MoneyLion editors

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What Lenders Look for If You Have No Credit

You can get a loan if you have no credit. But in order to do so, you may have to pay higher rates, need a cosigner or offer collateral. The lender needs these assurances since they will have a hard time assessing whether it's risky to lend you money.

Pro Tip: No credit means you have no record of borrowing history with the credit bureaus: Experian, TransUnion and Equifax.

The lender will look at your employment history, income and how much cash flow is in your bank account to assess your loan limit and APR.

• 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.

Typical Loan APR and Funding Speed

• APR ranges: 7% to 36%. For riskier loans, the percentage can be much higher.

• Funding: Same day or a few business days.

Best Types of Loans for No Credit

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.

Credit-builder loans: Your loan amount is placed in a savings account. These funds are locked by the lender until you pay off your loan.

• Who it's best for: People who are just beginning to establish their credit profile.

• One key risk: If you miss a payment, it can be reported as delinquent.

• How it builds credit: It's the quickest way to establish credit when you don’t have a profile.

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, the bank can use your collateral to pay your debt.

Secured vs. unsecured loans: The difference between secured and unsecured loans is collateral. Secured loans require some type of collateral — car, home or savings — while unsecured loans don't require collateral. Secured loans tend to have lower interest rates than unsecured loans.

• Who it's best for: People with some savings and at least one asset, like a car, that's completely paid off.

• One key risk: You run the risk of losing your collateral.

• How it builds credit: You build credit as long as the lender reports it to the three credit bureaus.

Cosigned Loans

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

Cosigner liability: The cosigner is just as responsible for the debt as you are. If you make a late payment, it will also be reported on the cosigner’s credit report.

• Who it's best for: If you need a large amount of cash but don’t have the credit to borrow that amount.

• One key risk: If you default, you run the risk of straining your relationship.

• How it builds credit: Both parties will benefit if timely payments are reported to the credit bureau.

What Do Lenders Look For?

To understand what lenders are looking for, it may be helpful to have a go-to checklist on what you need:

• Income: Provide proof of income in the form of a W-2 or recent pay stub.

• Employment: Provide an offer letter or other verification of employment.

• Bank activity: Provide a bank statement.

• Rent/utility history: Provide payment records regarding rent and utilities.

• Debt-to-income ratio: Provide a list of all your outstanding debts.

• Collateral: Provide proof of ownership.

• Cosigner: Provide support that a cosigner is willing to sign and has a good credit score.

How To Get a Loan With No Credit

Here's a guide to get a loan with no credit:

1. List your expenses to find out what you can pay every month for a new loan.

2. You can compare lenders to find the best rate by prequalifying. This will result in a soft pull on your credit.

3. Review the information about loan types and costs.

4. Have your documents ready, such as your ID, pay stubs and bank statements.

5. Determine if getting a cosigner will help you secure the loan.

6. Ask the lender if payment information is reported to all the bureaus.

7. Check the APR, fees and repayment terms.

8. Apply for the loan and find out when it will be funded.

What To Watch Out For When Applying for a Loan

Although signing up for a loan is tempting once you're approved, there are some red flags to watch out for:

1. Is the APR high? If the APR is above 36%, understand how much this interest will cost you in the long run.

2. Thinking about a payday/title loan? These loans can have 300% to 400%.

3. Is the lender asking for upfront fees? This may be a scam. Check the NLMS website to verify if the lender is licensed.

4. No credit reporting? This loan won't help your credit.

5. Penalty for paying the loan off early? This will hamper your flexibility in paying off the loan early.

6. Request for bank logins or password? This is a red flag.

7. Can't find the lender's physical address? This is likely a lender who isn't licensed, and you may be the victim of a scam.

How Much a Loan Can Cost

A loan's APR can impact how much you end up paying. Here’s a table to show the difference. Let’s take a $2,000 loan over 24 months at 28% and at 18%. Here’s how the payments look:

FAQs

No credit vs. bad credit — what's the difference?

No credit means that you don't have a record of borrowing history, while bad credit means there's a credit history with negative flags on your credit — missed or late payments, bankruptcy filings, collections.

Is prequalification a soft pull?

Yes, generally prequalifying will cause a soft pull on your credit.

How fast can I get funds?

This depends on the lender. You can typically get funds within one to three business days.

Do all lenders report to all three credit bureaus?

No, not all lenders report to all three credit bureaus.

Can a no-credit loan help build credit?

Yes, having no credit essentially means you're a blank slate, so it can help you build a credit profile.

Key Terms

• No credit: No credit means you don't have a borrowing history on file with the major credit bureaus, so lenders have less information to review.

• Annual percentage rate (APR): APR is the yearly cost of a loan, including interest and certain lender fees, shown as a %.

• Credit-builder loan: A credit-builder loan helps you build credit by making payments first. You usually get the money after the loan is paid off.

• Secured loan: A secured loan requires collateral, like cash or a car. If you don’t repay the loan, the lender can take that asset.

• Co-signer: A co-signer is someone who agrees to repay the loan if you don’t. The loan can affect both credit profiles.

Sources:

• Consumer Financial Protection Bureau: Credit reports and scores key terms

• Consumer Financial Protection Bureau: What is the difference between a loan interest rate and the APR?

• Consumer Financial Protection Bureau: Targeting credit builder loans

• Consumer Financial Protection Bureau: Differentiating between secured and unsecured loans

• Consumer Financial Protection Bureau: What is a co-signer for a student loan?

Summary generated by AI, verified by MoneyLion editors

Sarah Hostetler contributed to the reporting for this article.

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