3 Ways to Get Personal Loan with No Credit Score/Check
Esteemed readers of our site AllOnMoney.com have asked questions related to personal loan and credit score. And their questions are applicable to most of us, especially those who are in process of applying for loan or their applications have been rejected by the lenders.
Their questions are as follows:
- Can I get personal loan with no credit score?
- Are there lenders offering personal loan without credit check? This is especially the case with borrowers who have low/poor credit score.
- How to get guaranteed loan approval with no credit bureau check?
- Does low credit score mean that financial and commercial doors are closed by many lenders?
So this article tries to answers for the above questions and provides more information on credit score.
But before moving forward, let’s understand what is the relationship between credit score and personal loan?
Credit Score & Personal Loan Relationship
There is a very strong relation. Since credit rating serves as a parameter that measures your payment behavior.
In order for this to be understood, the score shows the probability of default of a person or company. That is, what is the risk lender or bank assumes in providing you with a credit amount.
This information comes from your credit history, which are not only loans or credit cards, but also from your general transactional activity, such as paying for your phone, cable, cell phone, etc. In that sense, banks use this as a reference for the loan applicant.
If this is the situation, can an individual get personal loan if he/she has no credit score or credit check is not made by the lender?
How to Get Personal Loan with No Credit Score or Credit Check
There are 3 ways to get loan with no credit score or check:
1) Secured Personal Loan: This is also called as personal loan against collateral. Imagine that you face a contingency and require credit urgently. But you have no credit history and it’s not possible for a financial institution to give you the amount you need, if applied traditionally.
In this scenario, you can opt for secured credit. It is the loan that is granted to the borrower by leaving the asset as a ‘guarantee’ with the lender. Your asset remains in the hands of the lender or creditor, for a certain period of time, as a guarantee of payment. At the end of the term i.e. after returning the sum borrowed plus interest and commissions to the creditor; you will get back the asset.
You can get secured personal loan with no credit score check by keeping following assets as collateral with the lending institution:
- Fixed Deposit
- Insurance Policy
Note that, depending on the country you live in, the type of asset varies. For e.g. in India, you can get personal loan with no credit check or credit score, by keeping above listed assets as collateral with the lending institution.
This ideally should be the first option to fulfill your emergency money need. In fact borrowing money from a friend/relative is very much normal. Since money borrowed from family or friends has the advantage, as there are no commissions or interest. But borrower should remember that money should be returned on time and fully. Because many times relationships are broken because of money. In fact, you can offer to pay small interest too.
3) Private Money Lenders: This should be the last option any borrower should opt for because of the approach such lenders take. First of all, private money lenders (also called as hard money lenders) offer loan against collateral with no credit score or check. And they don’t care about borrower’s ability to repay i.e. (whether they have credit score or not doesn’t matter to the lender). If money is no repaid, these lenders take a very harsh approach to recover their money by selling the collateral. The monetary value of the collateral is very high compared to the borrowed money.
Such loans are generally short tenured and borrower should refrain from remaining indebted for a longer period, because interest rates for hard money are generally higher than the traditional loans.
What is a credit history?
The credit history is a report provided by credit bureaus. This report helps lenders to find out how a credit applicant behaved with respect to debts. Since the report shows whether the payment of past loan installments has been properly paid, whether there is still an unpaid debt, whether it is common for the person to resort to the minimum payment of the card, among other aspects. Based on these factors, lenders establish a profile of their potential customers. With the information in their hands, lenders decide whether or not to lend the money and under what conditions.
What are the benefits of having a good credit history?
The main benefit of having a good credit history is that lenders will trust you and lend money. Better the credit history, better the terms you will get in terms of amounts, terms, and interest rates. If you have a low score, you may be able to get a loan, but the interest you are charged is likely to be very high.
In conclusion, if you want to access the best loans, you need to be highly responsible for the debts and maintain a clean record that positions you advantageously when applying for a personal credit.
This article has been written by Chandra Mehta.
Chandra is a seasoned banker with 35+ years of experience in banking and financial services industry. He’s a retired banker and has served as Chief Manager and Assistant Vice President in State Bank of India/or its subsidiaries.
He has authored many articles on this site (allonmoney.com).