5 Tips for Getting a Loan When You Have Low or No Credit
Posted on: 22 September 2016
When you have low or no credit, it may seem like getting a loan is hopeless. However, there are many ways you can get a loan even if you don't have perfect credit. This is a great way to get the money you need while working on improving or growing your credit history. Check out these five tips for getting a loan.
Consider a Credit Union
A credit union is basically like a bank. However, instead of being owned by shareholders, a credit union is owned by the members. They are a nonprofit organization. Instead of pocketing earnings, they use them to offer lower fees and interest rates to members. It is often easier to get a loan with a credit union if you have no or low credit. Make sure you choose one with which you have something in common. For example, if a credit union offers membership to people in your carrier field, they could be more willing to take a chance on you.
Ask a Family Member to Cosign
If you have a family member or close friend who has good credit (and there is mutual trust), ask them to cosign on a loan for you. The lender uses the credit score of the person with good credit to determine if a loan will be granted and what interest rate will be used. Keep in mind that when someone cosigns on a loan for you, they are just as responsible for that loan as you are. Anything good or bad will also impact their credit. Of course, this is a great way to improve your credit as long as you make timely payments.
Try a Peer-to-Peer Loan
Peer-to-peer lending is rather new. You need to post a loan listing on a peer-to-peer loan website. Investors will review these, and one may choose to loan you the money you'll need. They still take a look at your credit score, but individual investors seem more open to lending to people with low or no credit than institutions. The interest rate is also often lower, and the peer-to-peer websites evaluate the lender too, so you don't choose a scam.
Use Your Home's Equity
If you own your own home and have equity in it, you may be able to borrow some of the equity. You can get a home-equity loan or a home-equity line of credit. Your credit score is not taken into account for these loans because your house is used as collateral. Plus, they tend to have low-interest loans. A home-equity loan is a lump sum you receive, and a home-equity line of credit is like a credit account. Just make sure to evaluate the pros and cons before you pull money out of your home's equity because it will increase your monthly bills or take longer to pay off your mortgage.
Find a Lender Who Provides Low- or No-Credit Loans
There are lenders who provide loans to people with low or no credit. The best part is that even though they offer these loans, they still are quite flexible. Many still offer affordable interest rates despite your credit. Some only offer low borrowing limits, while others have higher limits, and some give you more time to repay. The hard part is finding a lender that matches your exact needs, but once you do, they are a great way to get a loan and work on improving your credit.
Just because you have little credit history or have less-than-perfect credit doesn't mean you can't get a loan. There are many ways people in your shoes get loans every day and improve their credit. For more information about loans, start by checking out lenders who provide low- or no-credit loans.
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