How to Get a Loan Quickly and Safely Without Credit History
Whether you're 18 years old with no credit history or 58 years old with no credit history, it might seem like getting approved for a loan would be next to impossible. But while it may have been an uphill battle a couple of decades ago, the digital era has made financial products more accessible than ever, including loans for those without a credit history. If you have no credit history in Canada, here’s a quick look at how to get approved for a loan quickly and safely.
Loan options for no credit history
Times have changed. Banks and credit unions are no longer the only places to go for a loan. Now, you can search the internet and find a plethora of lenders that cater to people with no credit in minutes. Using advanced analytics that go beyond credit scores, online lenders can calculate your ability to repay a loan by looking at factors like your income.
Be careful, though. Before you sign on any digital dotted line, make sure you understand the terms of the loan and fully appreciate the risks. Not all loans (or lenders) are created equal.
Here are the differences between two common types of loans available to people with no credit history: payday loans and personal loans.
Payday Loans
Payday loans are a popular—but extremely risky—option for those with no credit or poor credit. Applications are simple and approvals don’t require a credit check. You can get the cash in hand or wired to your bank account within minutes or hours.
However, payday loans are also dangerous and predatory. They have extremely high interest rates and ultra-short repayment deadlines, usually just one or two weeks. With payday loans, it’s easy for your finances to spiral out of control in no time at all.
Fortunately, safer options exist, even for those with no credit. Unless you like playing with fire, payday loans should be avoided at all costs.
Personal loans
Many reputable lenders offer personal loans to those with no credit history. These types of instalment loans offer extended repayment periods, so you can make equal payments over months rather than weeks, as well as more reasonable interest rates than payday loans.
Unlike payday loans, personal instalment loans can help you build credit (provided you don’t miss a payment), making them a great option for anyone with no credit.
Getting approved for a personal loan from a reputable online lender is also quicker and easier than applying for a loan with a traditional lender, such as a bank or credit union. You can apply entirely online in minutes, be approved in a matter of hours, and usually see the cash in your bank account on the same day—all without having to leave home.
No Credit Check Loans
There are some loan companies out there that will give you a loan with no credit check. The thing with that, though, id they don’t report to the credit bureaus, so your credit score won’t improve either. They often have much higher interest rates as well, making it very difficult to transition to lower-interest loans.
The most common type of no-credit-check loan is a payday loan. These loans often have short payback times, and they only offer certain amounts. Once you’ve taken out a payday loan, it can be very difficult to get out of the cycle because the interest rate is so high.
If you have no credit, you don’t have to turn to a no-credit-check loan. You’re better off getting a loan that does check your credit and reports to the credit bureaus.
How to get approved for a personal loan with no credit
Getting approved for a personal loan even when you have no credit is relatively simple nowadays. The entire process can be done online at your own convenience.
Total time:
- 3 minutes
What you’ll need:
- Government-issued ID
- Proof of income
- Your smartphone
Find the right lender
If you’re approaching some of the major banks or credit unions for a loan with no credit history, you might be disappointed because these institutions tend to be more stringent about who they lend to. On the other hand, you might find it easy to get the cash you need from a payday loan operator, but you'll be exposed to extortionate interest rates and unmanageable repayment due dates. Fortunately—thanks to the rise of financial technology—trusted online lenders are starting to emerge that specialize in fast personal instalment loans and know how to assist Canadians facing all kinds of credit situations. Compare these lenders and find one that offers fair interest rates and terms. And always look out for positive reviews and ratings.
Show your income
Getting approved for the right loan product (personal installment loan, credit card, auto loan, mortgage, etc.) will help you build your credit score, as long as you pay it back in full and on time. There are services and apps that allow you to monitor your credit score online, ensuring you stay in good financial shape.
Difference Between No Credit and Bad Credit
Having no credit score is much different than having bad credit. This is because bad credit shows a negative credit history, while no credit has no credit history, positive or negative. While it can be more difficult to get a loan with no credit, it’s very doable. You do need to have some form of credit on your report, and someone has to give it to you.
The thing with borrowing money and having no credit is you might get approved for a lower limit. Once you’ve proven you can make the payments, then you can get an increase. As long as you continue to make the payments on time, your credit score will increase, and you can get financing easier in the future.
While many people start their credit journey with a credit card, that isn’t always necessary. Having no credit is essentially a blank slate, so many companies understand that and will help you begin your credit journey whether you have a credit card or not.
Lastly
By choosing a reputable lender and a reasonable loan product, you can still meet your funding needs and build your credit history over time. Paying your loans on time and avoiding high-risk loans are key to ensuring financial health. Remember, good financial management habits will bring more opportunities to your future financial life.