Getting a loan with no credit or bad credit is oftentimes no easy feat. You end up applying for multiple loans with various lenders with the hopes of getting to the one that will say yes, and in the process, you end up impacting your credit and in some cases hurting your chances of getting approved by some lenders even more. Then what are you to do?
If you feel like your back is up against the wall and you want to know if you can get a loan with no credit or bad credit and how you may go about doing so, then you’ve come to the right place. In this article, we’ve outlined key steps you can take today in order to steer you in a good direction of finding a loan that works for you when you’re in a financial crunch.
STEP 1: UNDERSTAND HOW CREDIT SCORES ARE USED
A credit score is a mathematical method of determining how likely someone is to repay their debt in a timely manner from beginning to end. Credit scoring is determined by looking at a few specific factors including previous credit performance, new or recent credit inquiries, current level of debt, current balances, and type of credit availability.
There are three major credit bureaus: Equifax, Transunion, and Experian. All three of these bureaus use a different method for determining the scoring, so all three may have a different score for the same individual! Scores range from 350 – 850, with the higher score being more favorable to lenders.
Credit scores help determine the loan amount one may be eligible to borrow, the interest rate charged, and whether collateral will be required to secure the loan.
STEP 2: KNOW WHERE YOU STAND
If you don’t know your credit score, you may find out where you stand by ordering your credit report for free at annualcreditreport.com -- it’s the only authorized website to check your credit report for free every 12 months.
Your credit score sets the precedent for the type of financial institutions that will lend to you. Obviously the individuals with higher scores will have access to more lenders, while those with very low scores may be limited in the selection of lenders who’d be willing to take a risk without an adequate credit history. Those with lower scores may also be subject to paying more for the loan since lenders take on additional risks. Conversely those with higher scores and a proven history of repaying their debt on time may find lenders who are able to offer them loans with lower rates and longer time to repay.
STEP 3: WEIGH YOUR OPTIONS
When scoping out which lender you should choose (or which lender will lend to you), ask if the lender checks credit and if it’s a hard or soft inquiry before you apply for the loan. You may find that you are better off opting for a lender that offers loans with no credit check with traditional credit bureaus like those that offer loans secured by collateral (i.e. a pawn loan or auto secured loan).
Pawn loans vary from state to state, but are usually 30 day loans offered based a percentage of the value of the collateral. Pawn shops are known for offering pawn loans and can usually loan against the value of electronics, tools, jewelry, guns, or more. To get a pawn loan at pawn shops, the requirements are usually to have a government-issued ID and bring the collateral. These loans work well for those who have quality merchandise and are looking to borrow up to a few hundred dollars.
Auto title loan lenders also offer title pawns or auto secured loans, where you can get a 30 day loan against the value of your motor vehicle title. These loans also vary from state to state, but can go up to $15,000 and can be renewed on a month-to-month basis if you need more time to repay. To qualify for these types of loans, borrowers must usually bring proof of income, proof of residence, bank statements, a valid government-issued ID, social security verification, and the lien-free title and collateral in order to secure the loan.
If you don’t have collateral you can use to secure a loan, there are a few cash advance lenders who offer loans that do not require collateral. Since funding a loan without a credit check and without collateral is a big risk to lenders, borrowers are usually charged a higher interest rate to compensate for this risk and are usually approved for a lower amount.
STEP 4: WORK TO IMPROVE YOUR SCORE
Desperate times often calls for desperate measures, so before you find yourself in need of cash fast again, here are simple things you can do to start seeing improvements in your credit score.
- Make on-time payments. This is the most important factor to lenders and has the biggest impact on your score (about 35%).
- Work to reduce the amount you owe. A good rule of thumb if you have credit cards is to keep the balance on your cards below 30% of your available credit line.
- A longer credit history works in your favor. 15% of your credit score is determined by the length of time you’ve had an established credit history. Your length (or age) of credit history is determined by the average age of your accounts.
- Keep the amount of inquiries you have to a minimum. Creditors keep a record of the amount of inquiries you’ve had in the past two years, so aim to limit the amount of new credit inquiries that reflect on your credit report.
As you can see, there are options still available even for those with no credit or bad credit. One may opt for a pawn loan, auto secured loan, or an unsecured loan with a higher interest rate at various lenders.
If you have more questions about the specific options that may be available to you in your area or if you are ready to take the next step to find the help you need without the hassle, then look to Always Money Finance.
For over 20 years, Always Money Finance has been a regional leader in providing affordable credit solutions to customers across the southeast looking for a convenient and confidential way to meet their needs. Getting a handle on your money takes time, and Always Money understands. If you’re in a jam and need immediate help, any of Always Money’s small personal loan options may be just what you need to get you going in the right direction.
To get started,
- Visit a store near you (Click here to find the store nearest you),
- Call 1-888-618-9217 to get pre-approved over the phone, or
Related article: Money 101: How to build your credit