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How to get a loan with no credit or bad credit

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    Having a good credit score has a great impact on your chances of getting approvals for things like credit cards and loans. It shows potential lenders and creditors that you’re a responsible buyer and with low risk. Your credit score should be something that you monitor and keep track of regularly, using tools like Chase Credit Journey® to help guide you.

    While having a good credit score is key to being able to get loans and approvals, there are many people with poor credit. This can be due to any number of things including missed payments, delinquencies, bankruptcies and the derogatory remarks that result from this activity. Others have yet to establish a verifiable credit history and have no credit. So, how do you go about getting a loan? Below we will discuss:

    • Types of loans you can get with a bad credit score
    • How to get a loan with no credit
    • The best way to get a loan with bad credit

    Loans for people with bad credit scores

    Before applying for a loan, keep in mind the reasons why you need a loan and how this could further impact your score. There are several kinds of loans that you may be able to obtain even with a bad credit score. Let’s explore some of these loans below.

    Secured loans

    A secured loan is one that involves some sort of collateral—something valuable that you own— such as a car or a home. This loan is more secure for the lender because it is backed by assets. Should you be unable to make the necessary payments on the loan, your assets could be collected to help repay the debt, leading to foreclosure or collections.

    To apply for a secured loan, you will need the following:

    • Collateral—such as an automobile, home, savings account or something with financial value.
    • Government ID—to confirm your identity, you may be asked to provide a few forms of ID, such as your driver's license, passport, Social Security card or birth certificate.
    • Proof of income—this could include pay stubs, bank statements or tax returns.
    • Proof of address—you may be asked to provide a document including your name and address, like a utility bill, to confirm where you live.

    If you have bad credit, a secured loan could be an option for you because it helps lower the risk for the lender.

    Auto loans

    An auto loan is a type of secured loan, but if you’re buying a car with a bad credit score, you may want to consider a few tips. In addition to having a co-signer, you could put down a larger down payment. Doing so could help to lower your borrowing requirement. This can increase your chances of approval as it signals a lower risk to the lender. It will also reduce your overall interest payments. Saving up for a down payment before shopping for cars could be a helpful approach to auto loans with bad credit. With Chase Credit Journey, you can even simulate situations in which you take out a loan to see how it could further affect your credit.

    Joint loans

    A joint loan (or joint borrowing) involves taking out a loan with another person who is willing to support you with your loan payments. This person is called a co-borrower. Similar to a co-signer, a co-borrower is responsible for repaying the loan. However, a co-borrower also shares the funds or assets—like a home—whereas a co-signer does not. They hold more responsibility and will have their name appear on your asset’s title (or lease).

    Joint loans are helpful if your co-borrower is a friend, family member or loved one—someone you trust and are willing to share assets with. Having a co-borrower could help improve your chances of getting a loan, especially if you have a poor credit score.

    Credit card cash advance

    A cash advance is one that borrows a line of credit through your credit card. This may be an option for you if you don’t have money in your bank account. Depending on your credit card issuer, you can get the money in the form of a check or cash. This can be a quick way to get your money when you have a bad credit score; however, you could face fixed fees, withdrawal fees and very high interest rates.

    Home equity loans

    Getting a home loan with bad credit can be difficult, but there are some options available, including home equity loans. A home equity loan is considered a second mortgage loan because it involves claiming your home as collateral. It also considers a large percentage of the home’s value for the loan. According to the Federal Trade Commission, you may be able to get up to 80% of your home’s value toward your loan.

    Home equity line of credit (HELOC)

    A home equity line of credit (HELOC) is different from a home equity loan in that it allows you to access funds as you would like them. It acts as a line of credit that you can take out funds against, but you won’t accrue interest on the funds you do not use. You can access the funds in a few ways, such as through a wire transfer, a check or credit card associated with your account. This could be a flexible option for you if you manage your finances carefully.

    There are a few phases to a HELOC:

    • Draw period—the timeframe where you can borrow against your equity for things like home improvements or paying off debt. This period can last up to 10 years.
    • End-of-draw—occurs when your draw period ends, and you no longer have access to funds.
    • Repayment period—the duration that you pay back the principal and interest balance of the HELOC. This can last up to 20 years.
    • Refinancing—if you choose to refinance your home, you may be able to pay off your home sooner or lower your monthly payments. Having less money to put down each month could help you to boost your score if you make them in a timely manner.

    How to get a loan with no credit

    There could be a few reasons why you don’t have a credit history, such as never having a credit card or not using a credit card in recent years. If you’re looking to get a loan but do not have credit, there may be some ways you can increase your odds of getting approvals. Here are some tips:

    Compare options from different lenders

    Some lenders will allow you to get a loan even if you don’t have a credit history, such as a no-credit-check loan or a starter card. Be sure to compare their terms, conditions and interest rates, as you could face some higher fees as a new credit card holder.

    Note that you may not be eligible for certain cards that come with special perks or rewards. Premium cards typically require a higher credit score, which is affected by your credit history.

    You could also become a member of a credit union and apply for a payday alternative loan. They generally have high interest rates (upwards of 28% or more). These are small loans that typically don’t require you to have good credit or a credit history; however, you could be asked to provide additional information, such as proof of income.

    Consider a co-signer

    To help increase your chances of getting an approval, you may want to think about having someone co-sign the loan. This involves having someone you trust assist with payments should you run into any financial trouble. A co-signer takes responsibility for paying the loan in the event that you cannot, and they will have established creditworthiness, so they can help you get approved for a loan. This could be a great option if you are still working toward building your credit and starting your credit journey.

    Prepare for and complete the loan application

    Generally, with a good credit score, a lender can see that you can make timely payments and that you’re responsible with managing your money. Without this information, you may need to supply other evidence that you will be able to pay back the loan. This includes employment history, previous pay stubs and other documents that your specific lender is asking for. When applying for a mortgage, this information will be required.

    To set yourself up for success, make sure you have all this information ready to complete your application. Depending on what you’re applying for, you may be asked to provide additional information.

    Consider enrolling in auto pay upon receiving approval

    Once you’ve been approved for a loan—whether that’s a mortgage, personal loan, joint loan or one that you’ve co-signed—you may be able to acquire the funds within a week or as soon as in one business day. Now that you have a loan, you can start to build up more of your credit history.

    By making timely payments to your loan, you are showing that you’re able to make healthy financial choices. This counts toward your payment history, which—depending on the scoring model—can make up to 35% of your credit score. This, in addition to factors like your credit utilization ratio, helps to boost your credit score.

    To help set you up for success, consider enrolling in automatic payments. This can help prevent you from forgetting or missing payments. It creates consistency and a routine for helping manage your finances.

    Ways to get a loan with bad credit

    Bad credit means you likely have a VantageScore® range anywhere from 300-600 or a FICO® score range of 200-579. When you have bad credit, you likely have a habit of making late payments on your credit cards or have little credit mix, both of which are just two factors used to generate your credit score.

    There may be a few reasons why you need to take out a loan with bad credit, such as an emergency loan for things like funerals or medical bills. Let’s explore some ways you can get a loan with a bad credit score.

    Find lenders who will look beyond your credit

    Some lenders will take into account your financial situation outside of strictly your credit score. While a credit score is a guide, lenders may also consider other factors including your income, employment or level of education. Consider researching a variety of banks, credit unions or other online lenders as you compare your options.

    In conclusion

    Whether you have no credit history or a bad credit score, there are some ways you can still get a loan. However, not all lenders will approve you for certain loans and you may face higher interest rates. That’s why improving your credit score is essential. By increasing your financial savviness and making more proactive decisions about your credit, you can get access to more opportunities for loans and approvals. To further empower yourself with financial knowledge and insights, enroll in Chase Credit Journey.

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