Have no credit history, but need a small loan? Here’s how to get a loan with no credit history needed.

It’s easy to get discouraged if you have little to no credit or poor credit when you’re trying to finance. Whether you’re looking to buy a car or a home or start a business, loans are critical for getting started if you don’t have a stockpile of cash around. 

No credit is often viewed in a similar light by lenders as bad credit, though, it does work a bit differently. While many have been led to believe that you cannot get a loan with no credit history, that just isn’t the case. 

There are many lenders out there who will borrow money to anyone, regardless of their credit history. These types of loans tend to come with some stipulations, such as a larger down payment or higher interest rates

However, not all of these no credit loans will leave you with bad terms. We’re going to discuss how to get a loan with no credit history. Let’s begin!

How Do Loans Work?

If you’re looking for information about getting a loan with no credit, you’re probably new to borrowing. So, let’s talk about how loans work in the first place so that you can have a better understanding of the process. 

Most people don’t have loads of cash on hand at their disposal, and when it comes to making big purchases, they need some help. That’s where lenders come in; these can be family members, banks, or lending agencies. 

They’re just a source of cash that is willing to let some of it go as long as it will be paid back with interest. For example, your bank may lend you $1,000 for your car if you promise to pay back with 10 percent interest. 

This is a mutually beneficial system where you get the cash you need right away and pay it off in installments, and the bank gets paid the interest. If you were paying 10 percent interest on $1,000, the bank would make $100 just for letting you borrow that cash. 

This means that you pay a bit more than what you originally borrowed, but what you’re paying for is the convenience of not having to save that money up. 

What Lenders Are Looking for

When applying for loans, it’s important to understand what a lender is looking for in a borrower. It’s not just as simple as good credit or bad credit. 

A lender is looking for someone who has a history of borrowing — the longer the better. This, of course, can seem a bit worrisome for someone with no credit, but we will get to that later. 

When a bank or agency is deciding whether someone is a good contender to borrow money from them, they look at a few different things:

  • Credit score — the number given to you by one or more credit agency that gives a lender a quick look into how good of a borrower you are.
  • Credit history — not to be confused with a credit score, your history is much more in depth. Detailing when you’ve made or missed payments, how long you keep your credit cards open, and if you’ve ever defaulted on a loan.
  • Debt to income ratio — depending on the type of loan you are applying for, a lender will want to see how much debt you have in comparison to how much you make monthly. If you’re barely able to pay all of your bills, a lender isn’t going to want to give you more bills to pay. 

The only way for a lender to make money by letting you borrow is if you’re going to actually pay them back.

More than one million people default on their student loans every year. And that’s just one type of loan! They just want to know how likely it is that you’ll actually be able to pay the money back. 

How to Get a Loan with No Credit

Now that you know why most lenders won’t lend to you, let’s talk about how to find one that will. The first step is to find a reliable, honest, and trustworthy lender who is willing to give no-credit loans through resources like Bonsai Finance

Next, you’re going to want to focus on the few good things you have going for you in terms of credit. One is that you aren’t in bad standing with any other lenders, and two being your debt to income ratio. 

Try gathering some bills showing that you’re capable of making payments on time. We’re talking about things like rent statements, phone bills, utilities, or anything that proves your payment history.

While you’re at it, take a moment to consider how those expenses will play into your debt to income ratio. If your debt covers more than 40 percent of your income, you may have a hard time finding a lender. 

Recruit Some Help

You might also have the option of signing a loan with a co-signer, someone you trust who has some credit built up already.

This will give you a better shot at being approved because it shows that someone who understands how credit works trusts that you will pay the money back.

It’s very important, however, that you do pay your debt on time every month; otherwise, the consequences will fall on your co-signer, not just yourself.

And finally, shop around until you find the right deal. You don’t necessarily have to take the first thing that comes your way. If you receive a loan with incredibly high interest rates, give yourself the opportunity to look elsewhere.

You may find that the second, third, or ever fourth lender is offering a better rate. This will save you money in the long-run and give you a better shot at keeping your new credit history strong. 

Start Borrowing Today

Now that you know how to get a loan with no credit, you’re ready to get started. 

There are tons of lenders out there who are willing to give you chance; you just have to do a bit of work and look around. Don’t feel discouraged about your no-credit, and instead, look forward to turning that clean slate into something great. And while you’re at it, check out our business section to learn how to better manage your finances and promote your products or services. 

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