Credit is something you really don’t think much about until you need it. I see all the debt-free blogs and the money experts tell people not to worry about their credit score and never use any type of loan.
If only life were so easy.
Everyone will need debt and credit at some point in their life. Most will need loans and credit throughout their lives, that’s a fact.
Neglecting your credit score may mean you have no credit when you need it most. If you don’t have a cosigner either, that’s going to make getting the money you need very difficult…and potentially very expensive.
Getting the money you need, even if you have bad credit and no one to cosign your loan, will mean knowing where to look. Follow these steps to get a loan at reasonable rates.
Why Would You Need Credit or a Cosigner?
I’ve needed 12 loans and quite a few types of loans in the last two decades, that’s a dozen times I’ve needed money and that’s not including credit cards. Am I an irresponsible borrower, someone that can’t manage his finances and has to rely on credit?
I’d like to think not. I’m 41, own two homes and have half a million in assets. I’ve built a solid business that booked $86,000 last year and was able to save more than half even though my wife is in nursing school full-time.
Some of those loans were times I wanted to use debt as a business tool, like mortgages for rental properties and business loans to grow my online income.
Other times, I had no choice. I needed the money for debt consolidation or to pay for home repairs.
I’ve used a cosigner once before, and was extremely thankful I could because my credit score was horrible.
You can practice a debt-free lifestyle and it’s totally honorable to do so but you will need a loan eventually. When you do, your options are going to be extremely limited if you don’t have credit or a cosigner.
But I’m not going to worry about the problem. Let’s talk about the solution.
How to Get a P2P Loan with No Credit
Everyone has a credit score. When we say ‘no credit’ what we actually mean is your credit score is so low that it doesn’t help you getting a loan.
Credit scores range from 350 to 850 on the FICO scale though I’ve never seen a score below 450 or above 800 FICO. A score below 580 will usually make it tough getting a personal loan because most banks can only lend to ‘prime’ borrowers.
A super-low credit score or ‘no credit’ is usually one or a combination of factors.
- Very little or no credit history, something that affects students and young borrowers but also people that have avoided credit cards and other debt.
- A bad credit history including defaults, missed payments and bankruptcy. Even someone that has protected their score for years can ruin it in less than a month.
While your loan options are limited if you don’t have credit or a cosigner, you do have options.
Traditional banks aren’t going to let you in the door, they can’t. By regulation, they can only lend to a certain quality of borrower. Likewise some online lenders have high credit score requirements and won’t be able to approve your application.
Your best bet is a peer-to-peer loan from sites like PersonalLoans and Upstart. A p2p loan is direct from a private investor, not from a lender. This means application requirements can be looser as long as there are investors to fund your loan.
PersonalLoans is my favorite online lender and one I’ve used twice before, first for debt consolidation and for a home improvement loan. The website specializes in no credit borrowers so you might not even have to worry about a cosigner.
Upstart is another good option for loans because the site uses a unique credit model that includes other factors besides your FICO. Upstart was created specifically for graduates that don’t have credit but are still responsible borrowers. It might be a little difficult if you don’t have a degree but it is an option.
Loans for Bad Credit and NoCosigner
There are a few p2p andpersonal loan sites that specialize in approving bad credit loans without acosigner. Rates are going to be a little higher on these but you’ll be able toget the money you need.
BadCreditLoans is another bad credit p2p lender with options for short-term loans. Rates are higher on the site but I’ve heard credit requirements are less strict. As with all three sites, there is no prepayment penalty so you can pay off your loans to save on interest.
Applying on any of these sites won’t affect your credit score. They first do a soft-pull of your credit to estimate your rate so the best route is to apply on all three to make sure you’re getting a lower rate. There’s no obligation to take a loan when it’s been offered.
Check your rate on a peer loan – five minute application and immediate approval
How to Get a Cosigner for Your Loan
Most borrowers will be able to get a loan on one of the three sites above even if they don’t have a good credit score. If your credit score is extremely low, say below 480 FICO, there is still one last option you might try.
Each of the three p2p websites accepts cosigners to your loan in a joint application. It doesn’t have to be your spouse, just someone that can vouch for you on the loan. Your cosigner doesn’t need perfect credit either. Sometimes even two bad credit scores can be enough to get a loan.
You don’t need a cosigner to apply for a peer loan but it may help if you get turned down the first time.
How to Get a Personal Loanwith No Credit History
Credit history is more than athird of your credit score and is usually the biggest reason your personal loangets denied. It’s unfair for a lot of people, especially younger borrowers thatjust haven’t had the time to build up a good credit history.
Worse still is the fact thateven one bad mark on your credit report can destroy your FICO score if you havelimited credit history. Think of it this way. One missed payment doesn’t lookso bad on a credit report with ten years of borrowing and repaying loans. Takethat same missed payment and put it on a report with less than a year of credithistory…and it looks a lot worse.
So getting a personal loanwith limited or no credit history will come down to a few things you can do.
- Get allyour monthly payments added to your credit score. There are some onlineservices that can even get past rental payments added and immediately boostyour score.
- Get asmaller personal loan you can pay off fast to prove your credit quality. Thismight mean just getting a $1,000 loan and paying it off within a year beforeyou get the larger loan you need. P2P lending sites are much more likely toapprove a second loan after the first has been paid off.
What to Do Before You Need a Loan
As I started off saying, everyone is going to need credit someday. Whether you believe it or not, or want to lead a debt-free life, do yourself a favor and start building your credit score just in case.
Just a few easy steps can make sure you have good enough credit if (when) you do apply for a loan.
- Be on-time with your current loan payments as well as public utility bills. Set an email reminder or auto-deposit from checking.
- Get a credit card to pay for a couple of bills or groceries. This doesn’t mean falling into a debt trap. Just use your card to pay for groceries and then send in a check immediately.
- Monitor your credit reports with a service like TransUnion so you don’t fall victim to identity theft.
Finally, consider lining someone up as a cosigner if you ever need it. We talk to people about these kinds of what-if situations all the time but rarely do it for a cosigner. People have living wills, trusts, named guardians for their children, all of these are for those what-if situations. Why not talk to someone about cosigning for a loan if you’re stuck without options?
Getting a loan with no credit or a cosigner doesn’t have to mean super-high interest rates you can’t afford. A little planning will go a long way should the scenario ever come up. Even if you don’t plan ahead, peer loans can be good options for people with bad credit and joint applications are available for cosigners.
