Payday cash advance is a good option for those who have bad credit or no credit at all. As you apply online you can easily find a direct lender offering same day funding with no hard credit check.
If you want to get a loan with no credit, begin by looking for lenders that accept non-traditional credit histories like rent or utility payments.
Other loan options for borrowers with limited credit histories include Payday Loans, secured loans, and 401(k) loans.
Table of Contents:
There are many reasons why you might not have a credit score. On the one hand, you may be young or recently moved to the United States from abroad and haven’t had the opportunity to build a credit profile yet.
On the other hand, you may be someone who prefers to pay for things with cash or a debit card and you’ve simply never applied for a credit card. Having no credit doesn’t mean that you’re financially irresponsible. In fact, many people with no credit are incredibly creditworthy individuals.
But while having no credit is much better than having bad credit, the reality is that most lenders do use credit scores in their lending decisions. And having no credit can make it more difficult to get approved for a mortgage, auto loan, personal loan, credit card, or any other type of credit.
But you may be surprised to learn that it is possible to get a loan with no credit. Below, we’ll discuss your best options if you need a loan today before explaining some ways to build your credit if you’re trying to prepare to take out a loan down the road.
If you’re looking to get a loan with no credit history, here are five strategies worth considering.
Even without a credit score, there may be other ways to prove to a bank that you’re a trustworthy borrower. Some lenders will accept alternative data to assess a borrower’s risk, like their bank account activity and payment history towards rent, utilities, and other bills.
To get approved for a loan using your non-traditional credit history, you may need to contact a lender directly. And even better if you can find a bank or credit union that has a local branch near you so that you can talk to someone face-to-face.
If you plan to apply for a loan with a lender that offers manual underwriting, here are a few documents that you’ll probably want to collect beforehand:
- Recent W-2s
- Recent tax returns
- Last four to six pay stubs
- Last three to six months bank statements
- Rent payment history from the last 12 to 24 months
- Utility payment history from the last 12 to 24 months
Manual underwriting is most common in the mortgage industry. The government-backed FHA, VA, and USDA loan programs will each consider borrowers with no credit. But to gain approval, all your alternative credit information may need to be verified by a third-party non-traditional credit report.
If you’re looking to take out a personal loan with a thin credit file, payday loans aren’t your only option. Several online Payday Loan lenders have been known to lend money to borrowers with limited credit histories, including Avant, Prosper, Upstart, and Lending Club.
Some lenders may even offer “no credit check” personal loans. But you’ll want to check the fine print with these loans before signing on the dotted line. “No credit check” loans could be more likely to charge high interest rates and fees or have unattractive terms.
If you need emergency cash and you happen to be a credit union member, you should check to see if it offers Payday Alternative Loans (PALs). PALs are small, short-term loans meant to offer an alternative to high-cost payday loans.
These unsecured loans come with terms of one to six months and borrowed amounts can range from $200 to $1,000. Unlike payday loans, PAL application fees cannot exceed $20 and the maximum interest rate is 28%.
However, you won’t qualify for a PAL until you’ve been a member of your credit union for at least one month. So unless you’re already a credit union member, a PAL won’t be a good option if you need immediate cash.
Since unsecured loans don’t require any collateral, lenders tend to require that borrowers have strong credit scores in order to mitigate their risk. However, if you’re able to put down something of value as collateral, it could help you secure a loan even with no credit.
Here are a few examples of assets that a lender may accept as collateral for a secured loan:
- Real estate (home or undeveloped property)
- Bank accounts
- Stocks, bonds, or mutual funds
- Insurance policies
- Gold, silver, or other precious metals
In addition to more lenient credit requirements, secured loans may also offer better interest rates or terms. But the downside is that your collateral will be at risk if you miss a payment or default.
Make sure you weigh the pros and cons of a secured loan before you take one out. And try to steer clear of predatory title loan or pawn shop loan lenders that can place you on a financial treadmill by charging exorbitant rates.
If you have no credit and need quick access to a large chunk of cash, a 401(k) loan could be a legitimate option. But there are several pros and cons that you need to consider before you borrow from your retirement.
The biggest advantage of 401(k) loans is that you won’t be dealing with a lender whatsoever so there is no credit score requirement. With a 401(k) loan, you’re actually borrowing from yourself, so the “interest” you pay just goes right into your 401(k) account. Plus, as long as you stay with your employer, you’ll have up to five years to pay back the loan in full.
If you plan to repay the money quickly, a 401(k) loan could be a far more favorable borrowing choice than a payday loan, title loan, or pawn shop loan. However, know that if you don’t replace the withdrawn amount by the due date, you’ll have to pay taxes on the funds plus a 10% penalty.
Also, if you lose your job or leave your employer, the entire loan comes due and will need to be paid in full by the due date of that year’s tax return. So if your job situation is unstable, borrowing from your 401(k) becomes a riskier move.