(Newswire.net — August 11, 2020) — Credit serves as a safety financial net if you don’t have a job, you’re not earning well enough, or you need immediate compensation for an emergency.
Having a decent credit score means that lenders can trust you with the money they hand over to you. With credit, you can buy a brand new car or a house for yourself. However, if you have no credit, it means you don’t have a credit score or a credit history.
When this is the case, lenders typically hesitate to lend you money. Still, we’re here to tell you that it is very much possible for you to acquire a mortgage or a personal loan even if you don’t have an established credit history or credit score.
No Credit Doesn’t Mean Bad Credit
Before moving on, we thought that we’d clear the misunderstanding regarding the situation of having no credit history or credit score. Having no credit means that you’re starting from scratch, which is still better than having a bad score or history. Instead of having a bad track record with your credit, it only shows that you haven’t proven yourself with it yet. It’s still risky in the eyes of lenders, but not bad.
Here are some of the most common strategies on how to get a loan with no credit:
Ways to Get a Loan With No Credit
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FHA Mortgages
One of the ways on how to get a loan without credit is to seek out the Federal Housing Administration (FHA) mortgages. The FHA offers these loans via approved lenders.
The requirements for qualifying for these mortgages is more lenient than we thought. The minimum down payment for this mortgage is a lot less than the typical traditional home loan. That down payment can be as little as 3.5% if your credit score is 580.
Although you may get a mortgage here, we must warn you that FHA loans can be quite expensive due to their interest rates, which can be more than other mortgages. In fact, taking a low down payment mortgage is pretty risky.
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No-Credit-Check Loans
Some lenders can offer individuals loans without necessarily checking their credit. Such is the case when you’re thinking about getting a payday loan. Instead of good credit history, all you need is a regular income and a bank account. However, you need to hold off getting a payday loan, as the lenders tend to charge fees that are similar to annual percentage rate (APRs) of approximately 400% – sometimes even higher than that.
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Small Lender
A small lender, like an online lender, can be helpful to those without a credit history. Some of these small lenders are already geared up for action to help those with no credit history or score. They know what best fits your needs and will only provide you with the best help you deserve.
If that’s the kind of help you want, then visit Loans Geeks. They curate the best lenders in the market to ensure you find the best rates for your situation.
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Credit Builder Loans
If you’re looking for a fast monetary solution, then credit builder loans aren’t for you. This type of loan lets individuals get approved for a small loan, which comes with a brief repayment duration. Not only do you pay for a loan, but it also sometimes comes with a bit of interest. Once every payment has been made, you’ll be able to access the borrowed funds.
Think of this as a type of forced savings. These loans do precisely as their name implies; help us build credit. When the loans are paid on time, it will make your payment history positive and boost your credit score. What’s more, is that you learn the money you earned as payments back apart from how much the lender had charged the loan. Lenders typically give back much of the interest we paid except for the fees that were assessed.
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Apply for Payday Alternative Loan (PAL) From Credit Union
If you’re a member of a credit union and need quick cash for emergencies or any other urgent situation, see if you can access the union’s Payday Alternative Loans (PALs). These types of loans are short-term and small and are a substitute for high-cost payday loans.
PALs have a 1 to 6-month term and allows you to borrow between $200 to $1,000. The application fees for PAL, unlike payday loans, don’t go over $20 and have an interest rate that is as high as 28%.
In order to qualify for a PAL, you’ll need to be a credit union member for at least a month.
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Make a Huge Down Payment
If you want to apply for a mortgage or auto loan, lenders consider your down payment to be a big factor. Contributing a huge down payment won’t just lower the lender’s amount – which also brings down the overall risk – but it also convinces them that you are trustworthy and that you’re not thinking about defaulting.
A down payment of at least 20% can improve your approval chances when applying for a mortgage loan. Although there isn’t a standard amount for an auto loan, the more you contribute to a downpayment, the better your chances will be.
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Find a Cosigner
Finding someone you know with a good credit score, like a family member or a friend, could be just the answer you’ve been looking for on how to get a loan with no credit history. The cosigner also promises to have the loan paid back in case you don’t. But just be sure to pay that loan back, or you might risk harming both you and your co signer’s credit score (apart from your relationship with that co-signer, whether it’s a friend or family member).