Borrowing Without Established Credit Can Be Difficult- But Not Impossible
When you need to borrow money from a traditional financial institution, the first factor that the underwriters consider is your credit history. Your credit report provides underwriters with a snapshot of how you managed money in the past.
This is good for people with an excellent credit history. What happens if you have not established a credit history?
Fortunately, your lack of a credit history does not have to hold you back. Borrowing money without established credit can be challenging, but it is not impossible. There are plenty of loans available that do not require credit checks.
Guidelines for Getting Loans Without a Credit History
Getting a loan without a credit history requires a strategy. The following guidelines will teach you how to borrow money without established credit.
- Ask a family member or friend with good credit to designate you as an authorized user on their credit card.
As an authorized user, you will have all of the benefits of credit card ownership without the financial responsibility. After a friend or family member adds you to the credit card, you will benefit from the card issuer’s monthly reporting to the credit bureaus.
Although you will not be held legally responsible for repaying the debt, you must be careful to repay your debts on time. You do not want to ruin a good relationship over money.
- Get a cosigner.
Getting a cosigner for a loan is a viable option, but you have to proceed with caution when you share financial responsibilities with another person. If you do not repay the loan on time, it will affect your cosigner’s credit.
- Apply for loans that do not require a credit check.
The good news is there are a few types of loans that do not require an examination of your credit history such as a car title loan, payday loan and an installment loan. Another benefit of these loans is you can qualify for same day approval.
Let’s take a closer look at these loans. Title loans require you to use your vehicle as collateral, and they offer more affordable interest rates than payday loans. These loans are designed to meet your short-term financial needs. To qualify for these loans, you must own a vehicle with a clean title and have a steady source of income.
Installment loans have higher interest rates than loans from traditional lenders. With these loans, you can borrow a lump sum and repay in a few years. These loans require you to be employed and have a steady income.
Payday loans can have interest rates up to 1200%. Due to the high interest rates associated with payday loans, customers find it difficult to repay these loans. When you receive a payday loan, your money will be automatically withdrawn from your checking account each payday.
- Apply for a secured credit card.
Secured credit cards offer a smart way for you to build your credit history. When you apply for a secured credit card, you have to deposit $300 to $600 into an account. This money will be used as collateral for the credit card. Once the card is activated, you will use it in the same manner as a credit card.
Applying these tips will help you borrow money without established credit.