How to Get a Personal Loan with No Credit History


Your credit score is the first thing a lender looks at when disbursing a loan. It aids lender assessment of your creditworthiness. Now, what if you’re just getting started and don’t have a credit history? Is this a sign that you won’t be able to get a loan?

Worry not! You can still obtain a personal loan. While it can be a little time consuming, it is certainly possible.

1Some pointers to assist you in obtaining a loan with no credit history

  • Take out a secured loan.

A personal loan is an unsecured form of credit. It is given to those with an excellent credit score, preferably over 750. However, a person with no credit score can get a personal loan by pledging items of value as collateral. It will act as a guarantee that you will be able to repay the loan on time. You can also apply for substantial loans based on the value of the collateral you provide.

  • Apply for a low-interest loan.

Requesting a large-size loan, if you have no prior credit history, may be viewed as a high-risk proposition by the lender. This is because they do not have proof of your creditworthiness. In this case, it’s better to make a budget for your spending, figure out how much money you’ll need, and ask for a loan that you can afford to repay.

  • Demonstrate your credibility.

When you apply for a loan, your income level is quite essential. You’ll easily qualify for a loan if you have a steady source of income, work for a reputable company, and meet the lender’s loan eligibility requirements. You’ll also be requested to produce documentation, such as bank statements, tax returns, or pay stubs, to demonstrate your financial stability.

  • Obtain a guarantor.

You can also apply for a personal loan with no credit history if you have a guarantor or a co-applicant. For instance, you can use a family member, spouse, or sibling as a guarantor for the loan if they have a good credit history and a steady income. This will improve your chances of being approved for a loan. Furthermore, the lender will evaluate the co-financial applicant’s soundness and credit report before granting the loan amount.

  • On your credit report, request a NA or NH.

You might also request that your lender mark your case on your credit report as NA or NH. This means you haven’t used credit in the last 36 months or have no credit history at all. It will help you obtain a loan while having no negative impact on your credit score. However, the lender may grant you the loan at a little higher interest rate.

2What should you do if you are unable to obtain a personal loan?

If you’re having trouble getting a personal loan because you have no credit history, here are some possibilities to consider:

  • Get help of a cosigner: 

If you don’t qualify for a loan on your own, having a creditworthy cosigner can help you. Even though you don’t need a cosigner to qualify, having one may enable you receive a better interest rate than you would otherwise.

  • Make an application for a secured loan: 

While many personal loans are unsecured, some lenders also provide secured personal loans, which demand security such as a car or other valuable property. These loans are less risky for the lender. Therefore, you might be able to get an approval even if you have no credit history. In addition, compared to unsecured loans, secured personal loans may have lesser interest rates.

Remember to look into as many lenders as possible before taking a personal loan to find the best deal for your circumstances.

Also Read: Personal Loans vs. Credit Cards – Pros and Cons You Should Know

3Types of Loans to Consider

Borrowers with bad credit may find online personal loans to be a viable choice. These lenders do not have offline capabilities so that you can visit them; instead, they operate exclusively online. This translates into smaller overheads, and they can offer cheaper interest rates than banks.

In addition, online personal loans from non-banking finance companies have less stringent lending parameters when compared to banks. The application process takes only a few minutes, and if approved, you can collect the money as early as the next day.

How to build a credit history?

It’s a good idea to focus on boosting your credit history to qualify for loans faster in the future. Having good credit might also help you in situations such as acquiring low-cost insurance.

Here are a few options for establishing credit:

  • Take out a small secured loan or a credit-builder loan to help you establish your credit: Making on-time payments during the duration of a loan can assist build your credit history, as payment history accounts for the majority of your credit score.
  • Get a credit card with a security deposit: This card is backed by a deposit and can assist in credit diversification. But, again, make sure you pay your bills on time.

4How to Monitor your Credit?

It’s a good idea to keep an eye on your credit while you attempt to improve it. This way, you’ll be able to understand where you need to improve.

 You can do so in following ways:

  • Get a copy of your credit report: 

According to RBI guidelines, each credit bureau should provide a free base-level credit information report to its consumers once a year. Examining your credit report will assist you in better understanding your credit history and payment history. You can double-check them and file a dispute with the lender if you find an inaccuracy. In addition, you can keep track of your credit score this way.

  • Financial statements: 

If you have a credit card, you will receive a monthly report that includes a list of your purchases. Keep an eye on your account regularly to ensure that your credit card has an optimum credit utilization ratio. Ideally, it should be 30% or less. The effort will ensure that your credit score is protected from any decline.

  • Free Credit Scores and Credit Analysis:

Numerous third-party financial service organizations offer free credit scores and credit analyses. You can sign up for these services and get notified if anything changes in your credit report. This can provide you with real-time credit score updates. You may also log in at any moment to check the status of your credit score.