How To Get A Personal Loan With No Credit And No Cosigner?

Borrowers are often rejected personal loans because they have poor credit and no cosigner. But, there are ways around that too. Find out how.

Even for people who don’t have financial troubles can find themselves in a fix when it comes to emergencies. Anyone can want a chunk of money in fast cash to pay for expenses like a medical treatment or house repair etc.

That is when people head to private lenders for a personal loan, but it may not always be possible if you have bad credit or don’t have a cosigner.

What is a Personal Loan?  

A personal loan is a short-term loan granted to people for emergencies as a means of fast cash. This may be borrowed from a bank, credit union or an online lender, and the money is then given to the borrower on an Interest Rate.

The loan is to be returned in a period that usually ranges from two to seven years, and an interest rate that adds on with the principal amount each month. Most personal loans are unsecured loans, which means they do not require any sort of collateral. And because of this the interest rates are relatively higher because there is a high chance of the borrower defaulting on the loan.

What is a Cosigner?

A cosigner is simply a person who you trust to share the loan repayment. This person acts as a backer of the payment, meaning if the original borrower misses a payment, the cosigner will pay for it.

Having a cosigner on a high risk borrower improves their chance of getting a loan, because the lender has two people he can get the money from. The cosigner is 100% involved in the debt just as much as you are. But, don’t be fooled, getting a cosigner to sign on your loan isn’t easy.

Is it possible to get a Loan with no Credit?

Lenders know that people with a low credit score are high-risk borrowers who have a high chance of defaulting on the loan. If you’re one of those who have a low credit rating, you might get a personal loan but the interest rate will be very high.

Here is the general breakdown of how your credit score affects loans:

How credit score affects a 30 year long home loan of $200,000.

Score

Interest Rate

Monthly Payment

Total interest paid

760-850

2.727%

$814

$93,057

700-759

2.949%

$838

$101,578

660-699

3.34%

$880

$116,916

640-659

3.77%

$929

$134,261

620-639

4.316%

$992

$156,984

How credit score affects a 6 year long auto loan of $25,000.

Score

Interest Rate

Monthly Payment

Total interest paid

720-850

3.65%

$387.16

$2,875

660-719

4.68%

$398.92

$3,722

620-659

7.65%

$434.07

$6,253

619-and lower

11.92%

$487.72

$10,115

Note: Sample rates have been extracted online, courtesy of Debt.org.

Reasons of not getting a Cosigner

If you look from the perspective of a cosigner, it is very common for them to not want to cosign with you, especially if you have bad credit. They also know you have a high chance of defaulting on the loan which means the entire burden will fall on their shoulders. And not just that, they’re also looking for other reasons which would affect their records if they cosign.

From the perspective of a cosigner, here are the reasons why they won’t be willing to cosign:

  • It would increase their debt-to-income ratio which means if they were to get a loan under their name, they wouldn’t get the best deal.
  • Their credit history will be affected because there is a major loan that needs to be repaid each month.
  • Being a cosigner is a long-term commitment until the end- thus they can’t get out of the agreement when they feel like it.

How to get a Personal Loan with no Credit and no Cosigner?

Improve your credit rating

If it is not an emergency to get a personal loan, it is advised to improve your credit rating in the meantime. Your credit rating can be improved through prompt payments of your debts like your credit card. If possible, reduce the credit card limit and do NOT apply for a new one. Working on these areas and even putting in little effort can increase your credit rating within 3-6 months.

Personal meeting/interview

If it is an emergency where you absolutely have to get a personal loan with bad credit and no cosigner, you can have a meeting or an interview with the lender. The best you can do is explain your situation and prove to them that you’re not a bad risk after all.

Online Lenders

Online lenders such as Prosper, Upstart and Lending Club, have options for people with a poor credit history. While you may still need at least one or two accounts in your credit report, these lenders look at features of your financial profile beyond just your credit reports and scores when considering you for a loan.

Credit Unions

Another option is going to credit unions that may be affiliated with your employer or your community. Such organizations look beyond the credit rating and are often more interested in your income or DTI. Or if it’s a small community bank, they might give you a loan based on your promising character!

Secured Loans

You might try your luck with secured loans, because often when people have bad credit or no cosigner, they get secured loans. You can offer something valuable of yours like a portion of your home or your car as collateral. This gives lenders a peace of mind that at least they wouldn’t be at a complete loss if the borrower defaults on the loan.

Friends or Family

Asking from friends and family for a loan is an amazing option, getting a loan from your family will have you dodge hidden bank charges and lender fees. You can simply tie up with them the agreement and decide on an interest rate. If both parties agree, you can sign the contract with them and make sure you pay back their loan in due time. If not, it could really affect your image in front of them making it hard for you to ask for favours next time.

Shop around

Often what happens is that one lender refuses to lend the loan, but there are other people who would give you a personal loan and that too on a competitive interest rate. Shop around for better rates with more lenders and see if you get a better deal. The best way to handle this situation subtly is by asking around your friends and family- see if they know someone who got a personal loan with no credit and no cosigner. That way you can get a lot of different options and ideas on how to go about your particular situation.

Don’t lose heart if you somehow have bad credit and have no cosigner, there are still options to pay for your personal loan. Just make sure you’re asking the right sources.

John Otero

John Otero

John Otero is an industry practitioner with more than 15 years of experience in the insurance industry. He has held various senior management roles both in the insurance companies and insurance brokers during this span of time. He began his insurance career in 2004 as an office assistant at an agency in her hometown of Duluth, MN. He got licensed as a producer while working at that agency and progressed to serve as an office manager. Working in the agency is how he fell in love with the industry. He saw firsthand the good that insurance consumers experienced by having the proper protection. John has diverse experience in corporate & consumer insurance services, across a range of vocations. His specialties include Major Corporate risk management and insurance programs, and Financial Lines He has been instrumental in making his firm as one of the leading organizations in the country in generating sustainable rapid growth of the company while maintaining service excellence to clients.

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