3 Options for Getting a Loan With Poor or No Credit
Loan options are limited if you don't have good credit or a long credit history. However, there are still many different ways to qualify for a loan. Expanding your search to credit unions and peer-to-peer networks, as well as taking advantage of secured loans, can help you qualify for more loans at better interest rates.
1. Credit Unions
Credit unions offer a variety of loans at competitive rates, so it's worth seeing what they have to offer. Since they have a different business model than traditional banks, it may be easier to get a loan at a credit union than elsewhere. Credit unions are not-for-profit organizations, which means that benefits are returned to members in different ways, including better loan rates.
The catch is that you typically need to be a member of the credit union you want a loan from. However, you can still check common rates and terms online as a way to help narrow your search. It may also help to call credit unions you're interested in to ask about the loan you need and what would be required.
2. Peer-to-Peer Lending
With a peer-to-peer loan, you get your money from groups of individuals and businesses rather than traditional banks. Just like with banks, the rates and terms you qualify for depend on what P2P lending company you're going through. However, because you're borrowing from groups of individuals, it can be easier for you to be approved. This means that even if you don't qualify for the lowest advertised rates, you can still get a loan.
Additionally, these rates will still likely be more comparable to something like credit cards as opposed to something like payday loans, which traditionally have very high-interest rates. Still, it's worth shopping around to see the lowest rate you can get, so make sure you keep searching even if you qualify for a loan through a P2P network.
3. Secured Loans
Personal loans are typically divided into two types: unsecured and secured loans. The first type, unsecured loans are based more heavily on your credit score because the bank has no way of recouping any losses if a borrower doesn't pay back a loan; this usually means more stringent requirements and higher interest rates.
In contrast, secured loans are often easier to qualify for because they involve putting up something you own as collateral. One example is a title loan, where the bank assumes the right to take ownership of your vehicle if you aren't able to pay your loan. While secure loans can be easier to qualify for due to the added security, they can be risky if you aren't sure you'll be able to pay back your loan.
Before you apply for a title or personal loan, consult with a financial planner to see what your options are.