How to get a personal loan with no credit

Finding the money to cover life’s unexpected expenses or major purchases can be difficult, especially if you have no credit. However, while getting a personal loan with no credit might seem impossible, you still have some options.

If you’re wondering how to get a personal loan with no credit, here’s what to know.

Can you get a personal loan with no credit?

Yes, getting a personal loan with no credit is possible. Some lenders specialize in offering small loans to borrowers who have a poor credit history or no credit history at all. When making approval decisions, these lenders might consider non-traditional factors in addition to your credit, such as your education.

However, these options are far more limited, and you might need to apply with a co-signer or a co-borrower (also known as a joint applicant) who has good credit. These loans also tend to come with higher interest rates and more fees compared to good credit loans.

Tip: If you can’t qualify for a personal loan on your own and don’t have the option to apply with a co-signer or co-borrower, you might consider alternatives like a secured credit card or a credit-builder loan instead. 

Personal loan options for no credit

While there are some personal loan options for borrowers with no credit, these tend to have lower borrowing amounts, less favorable terms and higher borrowing costs compared to good credit loans. Be sure to consider your choices carefully before deciding which best meets your needs and financial situation.

Unsecured personal loan

Most personal loans require good to excellent credit. However, there are some lenders that are willing to work with borrowers who don’t have enough of a credit history to generate a credit score (known as having thin credit). These lenders will typically consider alternative factors — such as your education level — in addition to your credit when making approval decisions.

For example, both Oportun and Upstart offer loans to borrowers with no credit. Upstart also sometimes provides the option to secure your loan with a vehicle if you don’t qualify for an unsecured loan.

Compare your options: See the easiest personal loans to get

Co-signed or joint personal loan

To take out a co-signed or joint personal loan, you’ll need to find someone — such as a parent, another relative or a trusted friend — with good credit who is willing to share responsibility for the loan. This can increase your odds of approval and also qualify you for better rates and more favorable terms than you’d get on your own.

Keep in mind: A co-signer will be liable for repayment if you as the primary borrower don’t make your payments. A co-borrower, on the other hand, is equally responsible from the start. This can be risky for the co-signer or joint applicant, so make sure to have a plan in place of what you’ll do if you can’t make a payment. This can help to avoid straining your relationships.

Additionally, not all lenders permit co-signers or joint applicants, so you’ll need to check before you apply.

Secured loan

While most personal loans are unsecured, secured loans require collateral. Because this is less risky for the lender, it can be easier to qualify for a secured loan, which can make it an ideal option if you can’t otherwise qualify for a traditional, unsecured loan. Secured loans also tend to have lower interest rates.

Common forms of collateral for secured loans include:

• Real estate.
• Vehicles.
• Stocks and bonds.
• Savings account funds.
• Funds in a certificate of deposit (CD).

Keep in mind that while secured loans can have less stringent requirements, failure to repay can result in loss of your collateral. 

Credit-builder loan

If you’re looking to establish or repair your credit, a credit-builder loan could be a good option. Unlike a traditional loan where you receive the funds as a lump sum, the funds from a credit-builder loan are set aside in a savings account. You’ll then make payments toward this balance, and at the end of the loan term, you’ll receive the money minus any interest or fees. 

The payments you make on a credit-builder loan are reported to at least one of the three major credit bureaus — Equifax, Experian and TransUnion. This allows you to build a positive payment history and, in turn, can improve your credit over time.

Can you get a personal loan without a credit check?

Traditional personal loans from legitimate lenders generally require a credit check. There are also some short-term loan lenders — including those that offer payday loans, pawn shop loans and car title loans — that might not impose a credit check.

While this can seem tempting, these types of loans are often predatory in nature, and they can have astronomically high interest rates and excessive fees. Because of this, these types of loans should be treated as a last resort. Instead, it’s usually best — and much less expensive — to look for a traditional loan that permits little to no credit

Watch out for personal loan scams

In addition to avoiding payday loans, pawn shop loans and car title loans, it’s critical to be wary of personal loan scams. There are many scam artists who try to take advantage of borrowers with bad or no credit who are desperate for a loan.

Some warning signs to watch out for include:

• Guaranteeing approval without looking at your financial profile.
• Using high-pressure sales tactics to get you to agree to a loan immediately.
• Requiring an upfront payment before approval.

Ultimately, if it sounds too good to be true, it probably is. Always investigate further to make sure a lender is legitimate before providing information or paying any fees.

Tips to establish credit from scratch

Having no credit or bad credit can be a significant obstacle when securing financing, such as for large purchases, emergency expenses or business operations. While some loan options are available for borrowers with thin credit, it can be a good idea to focus on building your credit before applying if possible.

Here are some strategies that can help to improve your credit over time:

Get a secured credit card

A secured credit card requires an upfront deposit, which acts as collateral for the card’s credit limit. For example, if you deposit $500, then your credit limit will be $500.

By making on-time payments on your secured card, you can start to build a positive payment history. Additionally, some lenders will let you convert your secured card to an unsecured one after you’ve made a certain number of payments.

Become an authorized user

If you know someone with strong credit — such as a family member or close friend — see if you can become an authorized user on their credit card account. You can then benefit from their good credit habits without you even needing to use the card.

Start building your credit: See how being an authorized user affects your credit score

Avoid opening multiple accounts at once

Building credit from scratch is a lengthy process, and it’s important to take caution when opening new accounts.

“Taking out too many loans at once can [harm] your credit score, as it can be an indication of financial distress,” says Edward Araujo, president of Texas Consumer Credit Services.

Overextending your financial capabilities can also lead to missed payments, so “make sure you can afford the loan payments and make them on time,” says Araujo. Ultimately, it’s best to open only one or two accounts per year while slowly building your credit profile.

Payments, account balances and more: Learn what affects your credit score

Add other accounts to your credit reports

Some services allow you to add other accounts to your credit report. For example, you can use Experian Boost to get credit for your cell phone, utilities, rent and insurance payments for free. This in turn can add to your payment history and help you build your credit.

Set up autopay or reminders for regular payments

Missed payments can severely damage your credit score — and they can stay on your credit reports for up to seven years. To avoid late or missed payments, consider signing up for automatic payments where possible. If a creditor doesn’t offer automatic payments, set up reminders on your phone or computer to make sure you pay on time and in full.

Regularly monitor your credit

Monitoring your credit reports and credit score can help you see how changes to your financial habits — like obtaining new loans or defaulting on an existing credit card — affect your credit in real time.

You can use a site like AnnualCreditReport.com to access your credit reports from the three credit bureaus for free once per year. To check your credit score, use a credit-monitoring service, or see if it’s available through your bank or credit card issuer.

What should you look out for? Learn how to read your credit report

Establish good savings habits

Setting money aside to help cover emergency expenses can help you avoid relying on credit. It’s usually recommended to save enough to cover at least three to six months’ worth of your expenses in an emergency fund. If this is too much, start with just one month and build from there.

Do you have enough? Here’s how much you should have in savings