Nowadays, loans and credit are so interdependent that it seems you simply can’t get one without the other. But there’s still hope for those who have no credit and are in need of an installment loan. You just have to know where to look.
What is an installment loan?
In an installment loan agreement, borrowers receive a loan from a lender for a specific amount of money and pay back this figure over a predetermined period of time, typically ranging from months to years. The loan is repaid in fixed payments, plus interest. These types of loans are commonly used to pay for substantial purchases, such as homes (mortgages) and cars (auto loans), but they can also be taken out for smaller amounts. Unfortunately, as with many other types of credit, installment loans can be difficult to secure for those with no credit.
What are your options?
The news isn’t all bad though. There are still ways to work toward attaining an installment loan, even if you don’t have credit. Here’s how:
- Consider a cosigner. Lenders may not be willing to take a chance on you by yourself, but if you can find a cosigner who has good credit, they might. Cosigners agree to be responsible for the loan’s payments in the event that you can’t make them.
- Look local. You may have a better shot at an installment loan if you apply at a local bank or credit union, particularly if you already have a relationship with the institution. In general, local banks and credit unions are more willing to work with people who don’t necessarily have stellar credit.
- Shop around. Don’t let the fact that you don’t have credit keep you from at least trying. Look online to see what installment loans you may be able to qualify for, as lenders may be more willing to give loans to those with no credit than those with bad credit. Also, remember to do your rate shopping within a 30-day window. Concentrated inquiries will be viewed on your credit report as a request for a single loan, rather than several new types of credit. This will help protect your credit score from dropping as much as it would otherwise.
- Start after college. Try to find a loan that fits you. If you’re a recent college graduate, you may be able to secure a personal loan through Upstart’s peer-to-peer lending. This particular platform links investors with borrowers and is ideal for those who are still in the beginning stages of creating their credit history.
- Build credit. Finally, if you have some time before you need your installment loan, work on establishing your credit history before you apply. Start building your score by opening up a credit card for those with no credit, making your payments on time and keeping your debt low.