Lenders typically look at your credit history and credit score to measure your creditworthiness before lending money. This can be a problem if you are a recent graduate, have a low credit score, or have been avoiding any type of debt in the past. Fortunately, some lenders are open to providing loans for no credit history. Since the lenders will be taking on more risk, you’ll need to pay a higher interest rate compared to borrowers with a good credit score.

What Is a No Credit History Loan?

A no credit history loan is an installment loan where the lender doesn’t review your credit history or your FICO score when deciding whether to lend you money. Instead of a credit inquiry, lenders will look at other factors, such as your employment history and income, to qualify you. These are usually smaller loans with a short repayment term, and the loan rate can be quite high due to the risk involved for the lender.

If you’re borrowing for the first time, be sure to compare your options and make the loan payments on time each month to establish a good repayment history so you can borrow on more favorable terms in the future.

How To Shop for a Loan with No Credit History

Trying to prequalify for a personal loan for the first time without any credit history can be difficult and discouraging, but it isn’t impossible. However, there are several options available if you’re in need of funds.

Some lenders offer no credit check loans with less stringent eligibility requirements that you may be able to qualify for to establish a positive credit history. Here are a few tips on how to improve your chances of qualifying for these loans.

1. Look Into Specialized Lenders

Without a credit history, it may be difficult to get a loan from a traditional bank. But, there are several alternative lenders that specialize in offering personal loans for bad credit or no credit. These lenders will typically check your income and employment history to ensure you have a reliable source of income.

Many lenders offer an online loan application process, and you may get approved and funded within one business day. Before you provide any financial information, be sure to check the reviews of the lenders to make sure they’re trustworthy.

2. Get a Co-signer

You can also improve your chances of qualifying for a personal loan for no credit if you have a co-signer with a strong credit profile. A co-signer with a good credit history and credit score will strengthen your application and improve your chances of approval. But, they’ll also be legally responsible for paying back the loan if you fail to pay. Consider this option only if you’re sure you’ll be able to repay the loan on time to avoid damaging your relationship with that person.

3. Consider the Risks

Loans for no credit history can be beneficial for borrowers who are recent graduates or those who have not borrowed in the past, but only if they repay the loan on time. With timely payments, you can establish a good payment history, which can help you get a good credit score.

It’s also important to consider the risks of doing so. The interest rates for these loans can be quite high. There may be additional fees and penalties, such as origination fees, which can increase the total cost of the loan. If you fail to repay the loan on time, it can hurt your credit history instead of helping. You may also incur late payment fees, which can increase the loan balance. Additionally, you may get deeper into a cycle of debt, and it can be difficult to recover from it.

Teresa Dodson, debt expert and founder of Greenbacks Consulting, offers this advice: “When taking out a loan like this, make sure it's short term and financially manageable, about 12 months,” Dodson says. These loans can be high interest, and that’s something you don't want to get stuck in long term,” she adds. 

4. Choose a Loan Type 

Depending on your needs, there are several different types of loans for no credit history that you can choose from. You’ll need to review all your options and compare multiple loan offers to choose a loan type that suits your needs. Here are a few options to consider:

  • If you’re interested in purchasing a car, many lenders offer bad credit car loans as well as guaranteed approval auto loans that you may be able to qualify for without having a credit history.
  • You can also get a secured credit card by putting down a security deposit. You can then use the card to pay for your purchases, which helps you build a credit history.
  • If you want to build a credit history, consider applying for a credit builder loan. The lender will hold on to the loan funds in a locked account once you’re approved. You can start making payments on the loan and will get access to the funds once you have paid off the loan in full.  
  • There are several online lenders that offer bad credit loans, specifically to borrowers who have no credit history. These lenders do not conduct a credit check, so it’ll be easier for you to qualify. You can use the loan funds for home improvement, emergency expenses, or for any other purpose.
  • If you own a car, you may be able to borrow up to 50% of the car’s value through a car title loan.
  • Payday loans are another option, but consider them as a last resort because they can have annual percentage rates of 400% or more.

5. Build Up Your Credit Score

You can get access to loans at better terms if you improve your credit score. You can do this by paying all your bills before the due date and setting up autopay to make sure you never miss a payment. If you’re paying rent, you can look into rent reporting services to ensure it gets reported to the credit bureaus. Get a free copy of your credit report from all three major credit bureaus once you start doing this to check your progress. You should also check your credit report to spot any errors so you can dispute them.

6. Choose an Alternative

If none of the options listed above work for you, consider exploring these alternative loan options:

  • Check to see if you can get a peer-to-peer (P2P) loan. These loans are offered on P2P platforms where investors may be willing to lend you money even if you have no credit history.
  • If your employer allows it, you can also borrow a retirement loan. You’ll need to make regular payments on the loan along with interest to replace your retirement funds.
  • Check with your employer to see if they offer a salary advance instead of getting a payday loan.
  • You can also get a microloan from companies that offer credit to borrowers with no credit history.

4 Best Loans For No Credit History

If you’re looking for a loan for no credit history, here’s a list of the four best personal loans to choose from.

1. OneMain Financial

OneMain Financial offers unsecured and secured loans. If you don’t have a credit history, you can provide collateral like an RV or a car to secure credit.

  • APR: 18% to 35.99%
  • Loan Amount: $1,500 to $20,000
  • Repayment Terms: 2 to 5 years

2. EarnIn

EarnIn is a paycheck advance service that allows you to borrow funds through an app. Instead of interest, the company charges a fee and offers instant access to funds. The funds you borrow need to be repaid on your next payday.

  • APR: None.
  • Fees: $0.00 to $3.99 per transfer
  • Loan Amount: $100/day, up to $750 for each pay period
  • Repayment Terms: 7-30 days

3. OppLoans

OppLoans offers short-term loans without a credit check. Instead, they assess your monthly cash flow based on your bank account transactions to ensure you have enough income to repay the amount you borrow.

  • APR: 160%
  • Loan Amount: $500 to $4,000
  • Repayment Terms: 9 to 18 months

4. Possible Finance

Possible Finance offers small loans to borrowers with bad or no credit history. The loans are only available in a few states and are advertised as an alternative to payday loans.

  • APR: Up to 248.67%
  • Loan Amount: Up to $500
  • Repayment Terms: 2 months

The Bottom Line on Loans with No Credit History

Loans for borrowers with no credit history usually come with high interest rates and fees, so consider if you can afford the monthly payments carefully. But if you make timely payments, they can help you start building a good credit history so you can access credit at more favorable loan terms and lower interest rates in the future. When used with other strategies, such as on-time payments, setting up autopay, and keeping your debt low, these loans can be a helpful tool. If you’re in urgent need of cash, consider borrowing from a family member or consider other alternatives instead of predatory loan products like payday loans.