Have you recently hit a snafu in life, such as your car breaking down or incurring a large medical bill? It’s upsetting to think that you can’t get your car fixed or pay a high bill because you live paycheck to paycheck. Those who don’t have any credit histories or have low scores can still get loans with no credit, but it takes a lot of research and consideration on your part.
While having no credit can be beneficial because you don’t have to worry about digging yourself out of debt later, it is still important to establish your credit history as soon as possible. Without a credit history, you won’t be able to get a mortgage, car loan, and may not be able to get certain jobs.
Getting a personal loan can help you build your credit, but it is important that you choose the right one. They aren’t all equal, and some can be detrimental to your wallet and finances.
What Is Your Credit History?
What would you do if a friend asked to borrow $500 and you had the money? You know this person well, so you know their character. If they tend to be punctual, responsible, and trustworthy, you’d probably lend them the money. If they were always late, rarely took care of their responsibilities, and couldn’t be relied upon, you’d probably say no.
The same applies to lending institutions. The lender wants to make sure that you’re reliable and responsible before giving you money. If the lender believes you won’t repay the loan, you’re not going to be approved.
Many times, lenders check your credit score and history when you request a loan to help them see your track record and determine if you’re creditworthy or not.
Information on the way you handle your credit appears in credit reports held by three credit-reporting agencies, including TransUnion, Experian, and Equifax. Lenders look at this information from these places to determine if you’re a good choice to lend to. Without any information to go on, lenders aren’t sure if you’re financially trustworthy or not.
Options for Loans with No Credit
Determining if you should get a personal loan is a challenge for most people. In fact, you’re likely to need credit before you can get a loan, but you can’t get credit until you take out credit cards and loans to establish your history. It’s a Catch-22, but it is possible to build your credit from scratch, and a personal loan from a lender that doesn’t check credit can be one way to do that.
You can find lenders that specialize in no-credit-check loans. These loans are suitable for people with low scores or no history. However, it is essential that you focus on reputable lenders that will work with you. You should also be aware that you’re likely to pay higher interest rates and have more fees tacked onto the bill than if you had an established credit history.
Many times, these lenders offer personal loans and do not require an extended credit history. Make sure, when you apply for a loan, that the lender you select reports your loan amount and payments to the three credit-reporting bureaus. The goal here is to get money that you need while also establishing your credit history. When you fully pay off the loan (preferably without missing any payments or being late), you have just established credit.
Loans with no credit are easy to come by, but they aren’t all designed equally. It might be best to avoid payday loans and title loans if possible because they rarely get added to your credit history and can start you on the path to high debt.