Top Loans for Young People Who Do Not Have A Credit History
A good credit score is crucial for various reasons. Your credit score is what allows you to apply for more credit in the form of credit cards, loans, and so on. Many NBFCs are willing to offer loans and credit cards without a credit score, but they charge exorbitant interest rates. Still, it is difficult to find many lenders willing to lend to you.
When you haven’t borrowed in the past, or if you’ve never had a credit card or a loan, there will be no updates about your credit history with the credit bureau, which will mark such cases as NH, or ‘No History.’ The credit bureau will be unable to comment on your payment behaviour given the lack of detailed information. In such cases, some banks/financial institutions/NBFCs may refuse to provide you with consumer loans.
Not to worry. Every borrower did get their first loan from a lender. There are a number of credit options for genuine borrowers. Let’s have a look at the most popular credit alternatives available for young borrowers:
- Find lenders who will accept other data to determine your creditworthiness – Though credit score is a simple way to determine your creditworthiness, that is not the only data available to do so. You can offer other information like your bank account details, recent IT returns, asset & liability documents, credit card payment history, and so on. The point is to prove your creditworthiness. If you are able to provide documentation to satisfy the lender, they may be willing to lend to you.
- Payday Loans – If you are newly employed, you can opt for payday loans. payday loans are similar to personal loans, based on your salary, and hence do not pay much weightage to your credit score. There are many payday loan lenders in the market. These loans are processed online without much hassle of documentation and can be disbursed within 24-48 hours. These loans can come in handy in times of emergencies.
- Go for a secured loan – A credit score is crucial for unsecured loans, not so much for secured loans. If possible, offer some kind of collateral for the loan that can assure the lender of your repayment. You can pledge collaterals like property, vehicles, government bonds and securities, insurance policies, gold, etc.; Secured loans may offer better interest rates or terms in addition to less stringent credit standards. The disadvantage is that if you skip a payment or default, your collateral would be at stake.
Before you take out a secured loan, make sure you examine the benefits and drawbacks. Also, avoid fraudulent lease options or pawnshop loan lenders that might put you on a debt spiral by demanding high interest rates.
- Add a creditworthy co-applicant on your loan – To improve your chances of approval, you might add a co-applicant or a credit rating guarantor. Ensure that your co-applicant or guarantor completes the KYC procedures by signing the necessary documentation and providing the needed signatures. If you have a co-applicant or guarantor with a decent credit score, the lender will almost certainly agree to sweeten your loan package.
- Go for Insta Loans from Online lenders – In recent years, there has been a significant number of ‘Instant Loan’ Apps. These lending applications provide immediate loans depending on your salary, making them accessible to young consumers with little or no credit history. They are processed in minutes, and the funds are immediately credited to your account. They provide a number of benefits, including daily interest costs and the ability to return at any moment without penalty.
The loan amount is the key difference between instant loans and personal loans. When opposed to personal loans, instant loans provide a smaller credit size. Furthermore, because these instant lending applications are unregulated, you may find yourself caught by excessive interest rates and unfavourable loan terms. To avoid any negative experiences, it is critical to seek out competent and licensed loan apps.
Things to keep in mind for young people borrowing for the first time
A loan is a long-term financial commitment. Whether you are a new employee starting a new job or a young adult trying to start a new life, you may need to take out various types of loans throughout your life. There are numerous eligibility requirements that must be met in order to obtain a loan.
Your credit score is one of the most significant criteria for getting a loan because it determines the loan amount, interest rate, and other terms and conditions.
But how can someone with a bad credit score acquire a loan? Moreover, what if you have no credit history at all? Refer to the above list for the most common financing options for people with no credit history.
To avoid a bad experience, one should thoroughly assess the relevant variables before borrowing. While rapid lending apps and paycheck day loans appear to be attractive, they might be problematic if they are not properly managed. Personal loans may be advantageous as a long-term loan, while loans secured by your assets appear to be a safer option. Also, keep in mind that the loan should only be used to cover your immediate necessities. Never borrow more than you can afford to repay!