Can I Get a Loan with No Credit?

If you’re facing an emergency expense like an auto repair, surprise medical cost or unexpected travel, but don’t have the cash to pay for it upfront, a loan could help you find some relief. While most lenders look for good to excellent credit, you may still be able to get a loan with little to no credit. However, keep in mind that your options may be more limited than those with a solid credit score. Let’s dive deeper into some common no-credit loan options and how to apply for a loan with no credit, so you can decide what’s best for your budget.

What it means to have no credit history

Having no credit score means that you don’t have a credit history. Your credit history is a record of how responsibly you have managed your credit over time. This record is compiled into individual credit reports by the three major credit bureaus, Equifax, Transunion and Experian. Your credit history helps lenders, such as banks, credit unions and credit card companies determine how likely you are to repay borrowed money.¹ Having a good credit history can make it easier for you to get loans and credit cards and sometimes even rent an apartment or get a job.

If you've never borrowed money or used credit in any form, it can be difficult for lenders to assess your creditworthiness. Here are some common situations that can lead to having no credit history:

• Being young and recently becoming financially independent
• Never having had a credit card
• Not having taken out any loans
• Moving to another country and not having a credit history
• Relying solely on cash or debit cards for all transactions
• Using alternative lenders (like payday loans) that aren’t reported to credit bureaus

Loan options with no credit history

Fortunately, there are a few different types of no-credit loans that may be available to you, including:

Personal loans

Other lenders may have different ways of evaluating applicants, but at OneMain, we work with a wide range of customer credit scores and take your whole financial picture into account to help you find a loan that’s right for you. A personal loan lets you borrow a lump sum of money to cover various expenses like medical bills or home improvements. You can then repay the loan over time by making fixed monthly payments until the loan is paid off.

If you're approved for a loan, you may see the word secured or unsecured next to your offer. A secured loan requires that you provide collateral, like a vehicle. An unsecured loan doesn't require any collateral from you.

Keep in mind that there are eligibility requirements such as the condition and age of your motor vehicle and proof of insurance. Also, if a borrower defaults on a secured loan, the lender has the right to take the collateral.

Cosigned loans

If you don’t qualify for a loan because you don’t have credit, a creditworthy person like a friend or family member might be able to help. As long as their credit is in good shape, they may apply for a loan along with you to possibly increase your chances of approval. Many lenders, including OneMain, have rules about who can qualify as a cosigner—and some lenders do not allow cosigners.

Note that if you fall behind with making your payments, your cosigner will be equally responsible for repaying the loan and it can affect their credit score as well as yours.

Friend and family loans

A loan from a family member or a friend may be another option for you, especially if you have an emergency expense and are short on cash. If you do borrow from a loved one, make sure you discuss, agree and document the terms of the loan agreement so that everyone is on the same page. Also, it’s a smart move to pay back the loan as agreed to avoid straining your personal relationship.

Home equity loan or home equity line of credit

If a lender determines you have equity in your home, a home equity loan or home equity line of credit (HELOC) may be an option to consider. These are both secured loans, meaning your home is on the line as collateral, so you could lose your home if you’re unable to make your loan payments.

It’s important to consider that even if the interest rates look pretty good, you still need to take into account appraisal fees, which can cause costs to add up quickly. Also, a HELOC usually comes with a variable interest rate, which means the APR for your loan could fluctuate — up or down. OneMain does not offer home equity loans or HELOCs.

401 (k) loans

A 401(k) loan allows you to borrow money from your retirement savings account, typically up to 50% of your vested balance or $50,000, whichever is less.² Unlike a lot of traditional loans, there’s no credit check required and the interest you pay goes back into your account. It’s important to note that if you do not repay a 401(k) loan within five years it will be considered a taxable withdrawal with potential penalties.³

Payday loans

Payday loans are short-term, small-dollar loans that may help you cover immediate expenses until your next payday. You’ll typically pay these loans back with your next paycheck. However, it’s important to note that payday loans usually come with higher annual percentage rates (APRs) than other loans and can quickly steer you into a cycle of debt if not carefully managed.⁴ Be sure to weigh all your options thoroughly before choosing this route.

Pawn shop loans

Pawn shop loans are short-term loans secured by something valuable you own, such as a musical instrument or diamond ring. However, it’s important to note that the value of your item is determined by the pawn shop, which may not always be accurate or fair. In most cases, pawn shops lend only a small fraction of the estimated value, anywhere from 25% to 60%, and charge high finance fees.⁵ If you’re unable to repay the loan, the pawn shop keeps and sells your item.

Title Loans

A title loan is a short-term, high interest loan that allows you to borrow funds using your vehicle as collateral. You’ll typically hand over your vehicle’s title to the lender temporarily in exchange for cash, while keeping possession of the vehicle. The APR on these loans can be as high as 300% with a short repayment period of around 15 to 30 days.⁶ If you fall behind on your payments, the lender has the right to repossess and sell your vehicle, which could put you in more of bind if you depend on your car for work or school.

How to get a loan with no credit

Here are some helpful steps to take before you apply for a loan with no credit history:

Figure out your ideal borrowing amount and repayments

First, look at your income and expenses to determine the type of monthly payments you can afford. Before deciding if a loan is right for your budget, it’s smart to think about the financial impact of increasing your debt and your other monthly expenses. Also, consider what you need the funds for. If you have a car repair that costs $1,500, for example, you don’t want to borrow $5,000, or you may find it difficult to pay back your loan. It’s important to make sure that you actually need the loan and have exhausted other options before you decide to apply for it.

Collect your documents

Before you apply for a loan with no credit, you’ll need to ensure you have certain documents and information handy. Most lenders will ask you for a government-issued ID, such as a driver’s license or passport as well as pay stubs, tax returns and/or recent bank statements. The required documents will vary depending on the type of loan you’re applying for and the lender.

Prequalify

Depending on the type of loan you’d like to take out, you might be able to check and see if you prequalify for a loan without impacting your credit score. Prequalifying may give you a preview of what loan amount may be available to you, pending more information that comes with a full application. Once you prequalify with at least a few different lenders, compare all your options to zero in on the best one before you apply with the lender you choose.

Formally apply

After you choose the loan that works best for you, you can apply online or in person if the lender has a brick-and-mortar location near you. Be sure to double-check your application, as errors or inaccuracies may lead to delays in the approval and funding process. Please note that a hard pull and ding on your credit score won’t happen until you actually submit your application.

Accept the loan

While it may be tempting to accept a loan immediately, especially if your options are limited due to your credit situation, it’s important to review the agreement documents carefully. Before you accept, make sure you’re aware of the total cost of the loan and feel comfortable about how you’re going to be able to repay it. Some lenders may have hidden prepayment fees in the fine print, but OneMain offers clear terms and fixed payments. Plus, you can pay off your loan early without any extra costs.

Know your options, so you can grow toward your goals

Whether you’re young and haven’t had a chance to build your credit, recently moved to the U.S., or simply have little to no credit history, there are loans that may be within reach if you need to stretch your budget. As always, it’s important to consider the pros and cons of the loan you select and make sure you can comfortably repay it—before you sign on the dotted line. Also, don’t forget to consider alternative options and rethink your budget with our free budget calculator to make repayment easier.

Sources:

1 https://www.investopedia.com/articles/00/091800.asp
2, 3 https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-loans
4 https://www.bankrate.com/loans/personal-loans/payday-loans/
5 https://www.nerdwallet.com/article/loans/personal-loans/pawnshop-loans
6 https://consumer.ftc.gov/articles/what-know-about-payday-and-car-title-loans#car