It is usually very difficult to get a personal loan with no credit history as personal loans are unsecured loans, which means you do not need to provide any collateral such as property, shares or money to get the loan amount. This makes giving of the loan very risky to the lender. So, they tend to check your credit score and credit history which acts as proof of your dependability and capability to repay the loan on time without causing any problems to the bank.
If you have never borrowed before and have no credit score, then it is better to build your credit score before applying for a personal loan. Here are a few options you could explore:
1 Applying for a loan with a guarantor: If you apply for a loan with a guarantor who has a good and stable job with a good credit score, this can help with getting a personal loan. A guarantor is a person who will need to pay for your loan if you cannot afford to repay it. So, ensure that your guarantor has a good credit score and good credit history so that they can prove to the bank as a reliable source to give you your loan.
2 Score builder loans: There are special credit builder loans for people who are new to credit, wherein the loan amount that you borrow is held in a bank account while you make your payments to the bank. Your on-time payments are reported to a credit bureau, thereby helping you build your credit score. The money is then released to you once the loan amount is paid off. These are also called Fresh Start Loans.
3 Good income: A steady job with a reputed company can help you get a personal loan. If the company you work for is a listed company with the bank you are applying for a loan with, then there is a possibility of getting your loan getting approved. Also, you must have been working for the same company for a minimum of 2 years or more. Proof such as pay slips and bank statements can help you get a personal loan in these cases.
4 Lifetime free credit card: You could apply for a lifetime free credit card and use this as a means to build your credit score. You will not have to pay any amount to get a lifetime free credit card and if you make your payments on time, you can be on your way to building a good credit score.
5 Secured loan: If you are new to credit and looking for money for a sudden financial emergency, getting a loan against gold, property or any asset would be a sensible idea. You can pledge your asset and get a secured loan to use for your financial crisis. Also, the repayment of this loan will help you build your credit score. Interest rates for secured loans are much lower than unsecured loans.
6 Relationship with bank: If you are an existing customer with the bank you are borrowing from and have maintained a healthy relationship with them, then there are higher chances of getting personal loan from them. Long standing relationships come in handy at these times.