Young people may be pushed into borrowing money to cater for unexpected circumstances such as medical bills, college fees, pay for vacations, or even secure a home. The problem comes in when they do not have a credit history to back up their loan requirements. Getting a quick online loan would be tough if they do not have a credit history, and they may be limited to higher-cost options.
However, not having a credit score does not mean young people would not be approved for quick installments online loans. They can still get it provided they follow simple steps outlined by the legit lenders, such as Bugis Credit. In this article, we base what young people should know when applying for quick online loans without a credit check.
Why You May Lack Credit Score
Lacking a credit score does not mean that you have a bad credit history. It merely means that the credit bureaus do not have your credit history or information on your payment capacities. You may also lack a credit account, or perhaps you have one or two which have a thin credit file, here are some of the reasons you may have no credit.
If You Are a Recent Immigrant
Recent immigrants do not have credit scores. They might have excellent credit scores back in their home countries, but their credit scores are not transferred to their new states when they travel. This would force them to start building their creditworthiness from scratch.
You Have Not Used Your Credit for The Past 24 Months
You need to actively use your credit occasionally and repay your loans on time. This is what credit bureaus need to see on your account and generate your score. Not using your credit within the past 24 months will deactivate your account, and you would lose your credit history.
You Have Never Used Credit Accounts
case you have never used any credit type in borrowing and paying for debts, you won’t have a credit score. Scoring models use the track records of your interactions with credit and debit cards to assess your worthiness.
Which Types of Loans Do You Need?
According to Q2 2019, most of the quick installment loans are personal loans. These types of loans were lower than $20,000. Experian data reveals that you can get a personal loan as low as $1000. Luckily, you can use personal loans to buy for anything you want since they do not have collateral, unlike auto loans and mortgages loans, which demand you provide a guarantee such as a car and a house. This is why having a credit score is critical when applying for an online personal loan.
However, some lenders do not consider your credit score when approving your loan. Such lenders would prefer looking at other factors that are not included in your credit history such as;
- Employment history.
- Incomes, such as pay stubs or tax returns.
- Your bank account balances.
- Your debt-to-income ratio.
Types of Loans to Consider Without Credit
There are various lenders online who would provide you with quick installment loans if you do not have a credit score. However, it would be best to choose a lender depending on your ability to repay and the requirements outlined. Here are the two loans you can consider if you do not have a credit;
Online lenders have no physical locations, and they operate on online platforms. They offer lower interest rates on their loans due to their lower overhead. The most significant advantages of online loans are; they specialize in specific loan types such as personal loans, have simplified loan processing criteria, and their loans are as fast as less than 24 hours.
Peer-2-peer loans are online lenders sites that match potential borrowers with investors who want to make money through lending. Examples of P2P lending sites are; Prosper, Lending Club, and Peerform.
Loans to Avoid
As a young person looking for a quick loan to pay for your needs, you may be lured easily into applying for an online loan because it does not demand a credit score. However, there are loan types that you should avoid at all costs, even if they do not have a credit check. Such loans include;
This type of loan is available online or even at a physical location. Although it does not have a credit check, it charges high interest on its borrowing of 400% annually, which must be paid within 14 days. Failure to pay its loan on time means you would need to roll over, incurring additional charges.
Title Loans are credit-free loans that can use a car or a house as collateral. The alluring point is that you can use your vehicle as you pay for the loan. However, the bad news is that you can lose your car or a house if you fail to repay it within 15 to 30 days. They have high interests on their loans, making them a high-risk type of loans.
How to Build Your Credit
Young people may be delighted to get quick installment online loans without a credit history. They do not know that they may need their credit history to reach more jumbo loans to accomplish big purchases such as houses or cars in the future. As a young person, you need to start building your credit history through these tips;
Applying for a Secured Credit Card
A secured credit card helps you to establish and improve your creditworthiness. A card issuer can tap into your deposits if you cannot pay for the debt balance, thus being confident of extending credit even when you don’t have a credit history.
Becoming an Authorized User
Another secret to growing your credit is using a family credit card and being added as an authorized account user. Using the account regularly to buy and pay for debts will improve your credit score, although the account owner is ultimately responsible for the costs.
Get A Credit Report
Regularly get a credit report to check if your scores are improving. It usually takes only six months for your scores to be calculated.
The Bottom Line
There are many ways to get quick online loans, even if you do not have a credit history. The only essential consideration is to go for lenders who do not have a credit check on their loans. Such lenders would focus more on other factors and charge high interest on their loans, but they are worth it if you need quick money to settle your bills. However, do not limit yourself to credit-free loans. Work on building your scores for future higher loans.