Borrowing With No Credit: Financing Options For New Borrowers

It is a commonly argued topic by many finance gurus, what is more difficult: to borrow money with bad credit or with no credit. Many consumers who never had a credit card or a loan in their name find it very difficult to borrow money. A great amount of lenders consider borrowers with no credit histories as high risk, as there are no patterns established in the consumer borrowing behavior and there is a big deal of uncertainty of future ability to honor obligations. Despite the difficulty in obtaining financing, you should always remember that people with excellent credit history had no credit at some point in their lives. Getting a loan or a credit card is possible even with no credit at all.Start SmallIf your financial situation allows, apply for a credit card or a loan with small credit limit. The best places to try would be financial institutions that you have established a lasting relationship with, such as a bank or a credit union where you have your checking and savings account open. These institutions have a good idea of how you handle your personal finances and know your cash flows, and may extend you credit if they have a positive banking relationship with you. In case your attempts with your neighborhood bank fail, you may consider getting a secured credit card from a national bank. It does not matter how good or bad your credit is, as your initial credit limit would equal to the security deposit you would deposit in a separate account with the same bank. This would enhance your credit file, as lenders would see a revolving account on your credit report that is paid on time.Get Secured LoansSecured loans pose fewer risks to banks, and they are willing to extend credit to individuals with no credit history once the collateral is in place. If you have any valuable assets, such as a vehicle or a home, you may use them to secure a loan. Another great feature of secured loans is that the interest rates on such are lower, when compared to unsecured loans. Auto loan is great for starters, as it is secured by the vehicle you are purchasing. Next time you shop for a car or a truck, you may consider financing it, no matter whether you have cash in your pocket or not, just to get your credit record going.Explore Non-Traditional Financing InstitutionsThe previous two recommendations are great if you have some assets at your disposal or if you do not need money urgently. In case you need cash fast, and banks refuse to grant you credit, you may seek alternative financing options, such as payday loans, cash advances, or social lending. Some of lenders do not consider your credit history at all, just making their loan-granting decision based on your income and banking references.Search For Lenders OnlineMost lenders have an established online presence, and exploring your borrowing options has never been easier. In addition to traditional banks, there are lenders who operate entirely online and are able to approve you for a loan, when banks cannot. Therefore, a profound online search for lenders is highly recommended, as it allows you to find and compare multiple lenders from the comfort of your home, especially since most of them make loan-granting decisions quickly, very often in few minutes or hours.