Loan Options for People with No Credit or Poor Credit 

As you know, the credit score is one of the first things that lenders look at before approving a loan application. The higher your credit score is, the more likely you are to fulfill your financial obligation, at least in the eye of the lender. This shows your credit worthiness and your ability to pay back a debt. 

Now what would happen if you do not have any credit history established, or if you have low credit score? It becomes a lot more difficult to get loan approval. Take note of the word difficult. It can take you a longer time, or you will need check with more lenders. But this does not mean that it is impossible. 

Here are your options: 

Option # 1 – Home equity line of credit 

So if you have a home and you have some equity in it, you would want to consider taking on a home equity line of credit. But of course, you have to realize that this is not without drawbacks and risks. After all, you are putting your house at risk as it will serve as collateral for the loan. This means that if you miss any payment, you will end up losing your home. Still, a home equity line of credit is considered by many as one of the best options for people with no credit history or poor credit rating.  

If you are going for this route, see to it that you secure a tax deductible line of credit with reasonable interest rates. Also, there should be no restrictions on how you would want to spend your money. To be eligible for this type of loan, your loan-to-value ratio should be 80 percent. This means that the equity stake in your home is at least 20 percent.  Other than this, the lender will also look at your employment history and debt-to-income ratio. 

It is important to study extensively about this type of loan and to shop around for the most competitive rates. Keep in mind that the rates for this type of loan are usually higher.   


  • The money can be used in whatever purpose you want 
  • The interest rates are lower than with credit cards 


  • You will need to pay for closing costs 
  • Your home will be at risk as it will serve as collateral 

Option # 2 – Bad credit loan 

If you have poor credit rating, consider getting a bad credit loan. This is the easiest type of loan to apply for if you have very low credit score. However, you must know that this type of loan has excessively high interest rates. You need to think many times before going for this route, and look for alternative solutions so as not to get into the vicious cycle of debt.  


  • Application process is easy and simple 
  • Approval is easy  


  • The interest rates are excessively high 
  • There is a limit to the amount of money that you can borrow 

Option # 3 – Credit union loan 

Generally, it is a lot easier to take on a loan from a credit union than from other lenders such as banks Credit unions are established as non-profit entities, which is why the loans they offer are cheaper than banks, which are driven by profit. Aside from this, the standards set by credit unions are usually more lenient. In fact, almost anyone can join the credit union. The only requirements are residing in a specific location or belonging to a certain profession.  


  • Cheaper loans 
  • Application process is easier 
  • Fewer fees and penalties   


  • There is a limit to the amount of money you can borrow 
  • Payment duration is usually shorter 

Option # 4 – Peer-to-peer loan 

This is another possible solution for people with no credit history or poor credit scores. This type of loan is funded by peer-to-peer lending sites that allow borrowers to get loans from various individual lenders instead of financial institutions, hence the name. 

This type of lending has become very popular as it is one of the simplest and most effective options for people who have less than stellar credit history. In order to qualify for this type of financing, you need to have strong employment history.  


  • Easier application process 
  • The interest rates are lower than with credit cards 
  • Fewer fees and penalties 
  • You can borrow a higher amount than what banks offer 


  • Qualifications are strict 
  • It usually takes a longer time to get the funds 

These are just few of the many options that you have if you have bad credit or no credit history. Study all your options well, considering the interest rates and other costs to determine which one is most suitable for you.