People with poor credit ratings often struggle to find loans but then so do people who have no credit rating. It seems easy access to credit is limited only for those people who have a stellar credit rating. So how does one go about applying for loans with no credit?
Here we are going to look at the following issues with having no credit.
- Why obtaining a loan with no credit is difficult;
- Why lenders take credit ratings into account;
- Loans for people with no credit rating.
Why Applying For Loans with No Credit Rating Can Be Difficult
It is understandable why lenders may not offer a loan to someone with a poor credit rating but why not to people with no credit ratings?
If someone does not have a credit rating, his or her score can be neither good nor bad. However, lenders still put them in the same category as people who have a poor credit rating and this is unfair.
Young people are often caught in a vicious circle. To get a credit rating they must borrow, but lenders may turn them away because they do not have a credit rating.
Ways you can build a credit rating:
- Open a bank account in the United Kingdom;
- Make sure that you are on the electoral roll;
- Get a small overdraft on your bank account. You don’t even have to use it, it will still show on your credit rating;
- Get a mobile phone contract;
- Go for a credit builder credit card.
Why Lenders Focus on Credit Scores
Lenders consider credit scores when deciding whether to approve loans as this gives them an idea as to how big a risk you are.
If you have CCJs against you, a long list of missed or late repayments lenders are more likely to believe that they may not get their money back and may class you as being a big risk.
If you do not have a credit rating, they have no idea how big a risk you are. Therefore, they are going to be a lot more cautious about offering you a loan.
If you are looking for loans with no credit rating, you might want to consider applying for your loan with our help.
Start Off Applying for a Small Loan
When trying to get a loan with no credit you should off small. It is no good jumping in at the deep end and asking to borrow many thousands of pounds.
A better way to get a foot up onto the borrowing ladder is to apply for a loan offering a small sum of money.
If you do need to borrow a larger sum of money you might be better off looking for a guarantor loan.
Two types of loan that are generally easier to find approval for if you only want to borrow a small sum of money are the payday and short-term loans.
Payday and Short-term Loans
Both the payday and short-term loans are good starter loans that you may find approval for and which can even help you to get your credit rating off to a good start. Of course, to be able to do this, you must ensure the loan is affordable and you can repay it as agreed.
With a payday loan, you borrow between £100 and £500 and repay the loan on your next payday. Lenders will also allow you to spread out the cost of the loan for up to three paydays, which means a loan of three months.
Borrowing a small affordable sum of money and repaying it on your paydays, along with added interest can get you off to a good start while at the same time providing you with much-needed cash.
Payday loans have interest added daily, so the quicker you repay the loan the less the loan is going to cost you in total.
Short-term loans may offer between £500 and £1,000. This loan is not hanging over your head for many years as usually, lenders allow you up to 12 months to repay the loan.
Interest will be added onto the amount you borrow and the amount depends on the APR on the loan. People who have poor credit ratings or no credit rating are generally offered higher rates of interest than those with good credit ratings.
Consider a Guarantor Loan
If you need to borrow up to £5,000, you might think about taking out a guarantor loan.
When borrowing larger sums of money, lenders may allow you to spread out the cost of the loan for up to 36 months. This can make the loan more affordable but again you have to consider the fact that the longer you take the loan over the more the loan costs in total.
There may be more chance of obtaining a guarantor loan if you have not built up a credit rating than say a personal loan.
This is because you are not applying for the loan on your own. You ask someone to stand by your side as your guarantor. This may be a parent, other relative or a good friend. Of course, the guarantor needs to have a good credit rating.
Lenders are more willing to offer larger cash sums by way of guarantor loans as if you fail to make the repayments the loan falls back onto the guarantor.
This may not be an ideal situation and loans of this nature have been known to cause breakdowns of friendships and relationships. However, it is one way of you being able to get onto the credit ladder.
We Can Help Find You a Lender
We may be able to help find you a lender willing to offer you a loan. We work alongside lenders who consider all circumstances and who take verifiable income into account, not just credit past.
The lenders that we work alongside offer some of the most competitive rates of interest along with affordable loan choices. Apply for loans with no credit rating and get an instant decision.
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