Consumer debt is very common in the U.S. For example, just under 50 percent of American households carry credit card debt. Then there are the ubiquitous student loans and car loans.
Of course, people who carry debt often take it for granted that they can get a line of credit. They forget that there are people out there with no credit history.
The problem is that banks want to see a credit history before they give you a loan. So, how do you go about getting loans with no credit?
Keep reading for three options to get loans with no credit history.
1. Personal Loan
Many of the most common loans you hear about are for specific purposes. For example, you get a mortgage specifically to buy a house. While you might take out a slightly larger loan and use the extra to remodel, the bank will give most of the loan to the home seller.
With a personal loan, there is no specific purpose. The bank just gives the money to you. The good news is that many banks will give out very small personal loans even if you have no credit history.
This gives you access to a small amount of extra money and lets you build a credit history.
2. Get a Co-Signer
Just because you don’t have a credit history, it doesn’t automatically exclude you from getting a loan. While a lender might not take a chance on you alone, they will often let you borrow figuratively and literally on someone else’s good credit history.
In essence, you take someone with you to the bank. They co-sign the loan as a guarantee that the bank will get paid one way or the other. If you don’t make your payments, the bank will seek payment from the co-signers on the loan.
3. Secured Loans
A final option you can explore if you lack a credit history is a secured loan. Secured loans are different in that you put up some personal property of some value as collateral.
So, let’s say that you own your car outright. You could put up your car as collateral on the loan. The catch is that the bank will only give you a loan up to the value of the collateral.
So, if your car is only worth $3000, the bank will not lend you more than that. It’s also not a way to get a fast loan, but it can get your foot in the door with no credit history.
Getting Loans With No Credit
Getting loans with no credit isn’t a simple task. Lenders will prove wary about giving you a line of credit if you can show a history of making payments. There are still options available for those with no credit.
You can take out a small personal loan. You can look for someone who will co-sign the loan with you. You can also explore secured loans.
All of these options will help build a credit history and make future loans easier.
Looking for more loan tips? Head to our finance section for more posts.