How to Apply for a Loan with No Credit

If you need to apply for a loan but have no credit, there are options available to you.

When you begin shopping for loans, start with prime lenders. Even without credit, you may qualify for an unsecured loan with a high enough fixed income. Unsecured loans are those that do not require collateral to be laid on the line whereas secured loans do require some form of collateral. If you have assets such as a car or house, then you may be able get a secured loan with those assets as collateral even if you do not qualify for an unsecured loan. Secured loans, coming from a prime lender, will have better interest rates and terms than if you opted for a much more expensive payday advance. The danger associated with secure loans is that whatever you put up as collateral -- your house, car, or other assets -- can be taken away if you fail to pay your bills in a timely manner.

Who Is Your Guarantor?

Whether getting a secured or unsecured loan, you may increase your chances of getting a loan from a prime lender by finding a fellow guarantor. Guarantors are the people responsible for paying off a loan. As a co-signer, your fellow guarantor would only be called upon to repay the loan if you fail to pay. If you ask someone else to act as a co-signer, the lender will check their credit history as well as yours. Only if their credit history is stronger than your own will they be accepted as a co-signer and increase your chances of getting the loan. Remember: if you do not pay off the loan, then your co-signer may undergo significant financial annoyances or hardships, and may hold that against you. Hence, you both need to be ready to assume not only the financial but social risks of taking out a loan together.

The Worst No Credit Option

Instant approval payday advance loans are available to anyone who can demonstrate regular income, but payday advance lenders typically target individuals who have no other loan options. Because there are few legal restrictions on this form of lending, lenders habitually charge exorbitant rates and leave many of their customers with no clear option other than to take out a new loan to repay their old loans. Avoid these loans unless absolutely every other option is exhausted to resolve your financial needs. Even sub-prime lenders and secured loans are typically better options than payday advances. Whatever loan you choose, make sure to ask all the questions you need to understand the terms of the loan, and never feel pressured to take out a loan without carefully analyzing your options.

When you apply for a loan, make sure only to apply for as much as you need. The larger the loan, the greater its immediate and long-term costs will be to you, and the less likely you will be able to pay it off.


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