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How to Get a Personal Loan with No Credit

For those people who are looking to get a personal loan without any credit, there are some interesting options to consider. It goes without saying that having no credit can be a real impediment to getting financing, so you will need to look at some interesting alternatives if you are going to make it happen.

That being said, options do exist, so you have to check into them if you have serious money needs. The most common ways to get a personal loan with no credit are to use co-signers for traditional loans or to explore some of the alternative loan measures out there.

Co-signers for traditional financing

How to Get a Personal Loan with No CrediIn just about any type of economic situation, traditional bank lenders are going to demand certain things out of their borrowing parties. They need to limit risk, so they require a certain amount of credit history before they will even consider giving out a loan.

It is certainly true that having no credit is better than having bad credit, but you will still be precluded from getting financing for the most part. This is especially true in the current economy, since the credit markets have tightened up to an extent.

So what are you going to do in order to get around that?

The answer lies in finding the right co-signer for your loan. People use co-signers for lots of different reasons, some of the most common being financial aid loans and small business loans. You can use a co-signer for a personal loan, too.

Finding the right person is key, because they will basically be acting as an insurance policy against any potential credit mishaps that you might have. When choosing a co-signer, you need to look for the following things in that person:

  • A solid credit history that dates back a few years
  • A credit history that includes success in paying back personal loans
  • Someone with a steady job situation and a solid financial foundation
  • Someone that you can trust and that also trusts you

The highly personal nature of co-signing

When you use a co-signer to help out with the loan, you are entering into a highly personal relationship with not only the lending party, but also with your co-signer. They are doing much more than just putting their name onto the paper beside yours. In addition to that, they are entering into a partnership with you for the term of that loan. As the co-signer, that person is going to be held responsible for you and for your loan.

This means that if you default on the loan, they are going to be liable for the amount borrowed, too. It goes one step further, though. Even small mishaps on your part will show up on their credit report. A missed payment or a late payment will have detrimental effects on their credit score, so it's essential that you make the payments on time.

With this type of financial relationship, there are some things to remember. These are things that you can also tell a potential co-signer to make them feel a little bit better about things if they are currently sitting on the fence. The following items are critical to personal loans with a co-signer:

  • The co-signer gets full access to payment histories and current terms of the loan
  • The co-signer can opt out of the agreement after a couple of years if the primary signer makes 24 consecutive payments in most agreements

This means that the risk is somewhat lessened for the person signing with you, but chances are that they will only agree to co-sign with you if you have a good relationship with them. Because of the trust factor that comes into play, most people choose a family member, business partner, or a close friend for this type of agreement.

Going around the traditional financial world to get a personal loan

Some people find that it is easier to get a personal loan when they go outside the bounds of the traditional financial market. Instead of using banks and using co-signers to lessen their risk, they take their information to pay day loan lenders. If you have no credit at this point, then this becomes a viable option.

Pay day loan lenders do not need to know your credit history and most of them do not even look at your credit score. As long as you have a few things in your favor, you can qualify for a personal loan by these means with little trouble. The following things are necessary for getting one of these loans:

  • A bank account that is in good standing and allows for direct deposit
  • A current job that pays a routine amount every two weeks
  • Proof of employment and multiple forms of identification
  • Ability to provide multiple references to verify your employment history and your ability to pay back a loan

These personal loans are easy to qualify for and they provide a very real option. The only downside is that they are short term loans that must be repaid within a month or so.

Likewise, they have high interest rates that make them a difficult option for people who want to be fiscally sound. Using this option for anything other than an emergency source of funding can cripple you financially and it's a very poor way to start out when you have no credit.

Summarizing the options

Just because you have no credit does not mean that you are completely shut out from potential financing. What it does mean is that you will have to get a little bit more creative than the average person. It might take a little bit more time and you might have to round up a co-signer to help you get a traditional loan if that is the route you want to go. Otherwise, pay day loan options are abundant and they are viable under the right circumstances.

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