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All borrowers, even those who have been borrowing for a long time, have started in the same place of having no credit history at all, which means that you’re not alone. Every borrower will experience building credit from scratch. That being said, there are loan products intended to help you create a credit record.
Loan Options For Borrowers With No Credit
At some point, having no credit history is as bad as having a poor credit remark. Lenders have no basis about your behavior when it comes to repaying the loan, therefore they might consider you as a risk. The only advantage it has, perhaps, is that you can start building a credit history on the right foot. But as a first-time borrower, you must be extra careful. There are no-credit loans that are beneficial while there are debts that can be detrimental.
It sounds ironic but in order to build a credit history, you need to get a loan, and in order to get a loan, you need to have a credit. So how are you going to do this? Well, there are two common options available such as credit cards and no-credit loans. When you choose to build your credit with credit cards, the best thing you can do is apply for secured credit cards. This works almost the same as regular credit cards; however, you will deposit a specific amount to your bank as security. After a year of having a good record, you can ask your bank to change it to a regular credit card.
Meanwhile, when you opt for no credit-loans, you are going for loans intended on this purpose. Basically, the lender will not check your credit rating and you can the loan as it is. Therefore, be sure to manage your debt and repay the loan on time to avoid damaging your credit record.
How To Apply for No Credit Check Loans
The financial status of many people nowadays is that they have a low income, weak credit, and little to no savings. So when an emergency happens-like an unexpected medical situation or auto-repairs, your options are limited. And in that case, a loan might be necessary. But with having weak credit, your options are limited, and how do you make it so you don’t mess your credit up even more?
But what if you don’t even a credit? What does having no credit mean? Every person has a credit score. The most common scoring system used is the FICO system which rates as following
750 to 850 (Excellent)
660 to 749 (Good)
620 to 659 (Fair)
350 to 619 (Poor)
Having no credit score usually means that you never established a credit history. This makes Lenders have a hard time gauging the risk in lending you money.
How can someone have no credit? If that someone has never borrowed money from a bank or a union, never had a credit card or never had any utility bills, they’re basically off the credit grid. There are no problems with this other than when in times of emergencies and you need to get a loan, things might get complicated.
Why does checking credit important? A lot of information about the borrower can be taken from credit score alone. From how often the borrower applies for a loan to how like he/she will pay on time. Many lenders conduct this thing called a “hard credit inquiry” to determine how risky it is to lend money to the borrower.
But be wary, when you get hard checked, your credit score takes a hit, and if you’ve been hit by a hard inquiry after another, that usually means that you are desperate for money and it may look like you’re mismanaging the money by the lender's eyes.
So what are your options when getting a loan with no credit?
There is a thing called No Credit Check Loans. But be very careful, when a lender offers you a no credit check loan, it usually means it has pretty high-interest rates and short term amounts. Most lenders who offer this kind of loans are predatory lenders. Their goal is to trap you into a cycle of debt, in which they keep offering you to extend the loan causing you to keep on paying and paying and paying the fees without reducing the principal loan.