First Time Personal Loans with No Credit History: A Complete Guide

For many young adults and those new to borrowing, getting approved for a first time personal loan with no credit history can seem like an impossible task. Traditional lenders often rely heavily on credit scores and reports to assess risk, leaving those with a blank credit slate at a disadvantage. However, there are options available for borrowers seeking their first personal loan without established credit.

This comprehensive guide will explore everything you need to know about personal loans for first-time borrowers, including:

Why it’s challenging to get approved with no credit
Lenders that offer loans to those with no credit history
How to improve your chances of approval
Alternatives to consider
Building credit responsibly with your first loan

The Challenge of Getting a Loan with No Credit History

When you apply for a personal loan, lenders assess your creditworthiness to determine the risk of lending to you. With no credit history, you’re essentially a blank slate – lenders have no way to predict how likely you are to repay based on past borrowing behavior.

According to a study by the Consumer Financial Protection Bureau, about 26 million American adults are “credit invisible,” meaning they have no credit history with the major credit bureaus. This can make it extremely difficult to qualify for traditional loans and credit cards.

Some of the key reasons lenders are hesitant to approve loans for those with no credit include:

No track record of managing credit responsibly
Inability to calculate credit scores
Higher perceived risk of default
Lack of information to base lending decisions on

However, having no credit isn’t necessarily the same as having bad credit. You may simply be new to borrowing and haven’t had the chance to establish a credit history yet. The good news is there are lenders who specialize in working with first-time borrowers.

Lenders That Offer First Time Personal Loans with No Credit

While approval may be more challenging, there are several lenders that offer personal loans specifically for those with no credit history. Here are some top options to consider:

Lender	Loan Amounts	APR Range	Minimum Credit Score
Upstart	$1,000 – $50,000	6.5% – 35.99%	No minimum
Avant	$2,000 – $35,000	9.95% – 35.99%	580
OneMain Financial	$1,500 – $20,000	18% – 35.99%	No minimum
Oportun	$300 – $10,000	20% – 67%	No minimum

Upstart

Upstart is an online lender that uses artificial intelligence and machine learning to assess borrowers beyond just credit scores. They consider factors like education, area of study, and job history. This makes them a good option for recent graduates and young professionals with minimal credit history.

Avant

While Avant does have a minimum credit score requirement, they’re known to be more lenient with credit history length. They offer quick funding and a wide range of loan amounts, making them suitable for various needs.

OneMain Financial

OneMain Financial specializes in lending to borrowers with less-than-perfect credit or limited credit history. They offer both unsecured and secured personal loans, with the secured option potentially offering better rates for those with no credit.

Oportun

Oportun focuses on serving borrowers with little to no credit history, particularly in underserved communities. They use alternative data to assess creditworthiness and offer smaller loan amounts that can be good for building credit.

How to Improve Your Chances of Approval

While getting approved for a first time personal loan with no credit history can be challenging, there are steps you can take to improve your odds:

1. Apply with a co-signer

Having a co-signer with established credit can significantly boost your chances of approval. The co-signer agrees to take responsibility for the loan if you can’t repay, reducing the lender’s risk.

2. Offer collateral

Some lenders offer secured personal loans where you put up an asset (like a car or savings account) as collateral. This can make approval easier and potentially get you better rates.

3. Show proof of income and employment

A steady income and stable employment history can help demonstrate your ability to repay the loan. Be prepared to provide pay stubs, tax returns, and employment verification.

4. Start with a smaller loan amount

Requesting a smaller loan amount may be less risky for lenders and easier to get approved. You can always apply for larger loans in the future as you build credit.

5. Explain your situation

Some lenders allow you to submit a letter explaining why you have no credit history and how you plan to use and repay the loan responsibly. This can help humanize your application.

Alternatives to Personal Loans for Those with No Credit

If you’re having trouble getting approved for a traditional personal loan, consider these alternatives:

Secured credit cards

Secured credit cards require a cash deposit that serves as your credit limit. They’re easier to get approved for and can help you start building credit.

Credit-builder loans

These loans are designed specifically to help build credit. The money you borrow is held in a savings account while you make payments, then released to you at the end of the term.

Peer-to-peer lending

Platforms like Prosper and LendingClub connect borrowers directly with individual lenders. Some may be more willing to work with those who have no credit.

Local credit unions

Credit unions often have more flexible lending criteria and may be more willing to work with members who have no credit history.

Building Credit Responsibly with Your First Loan

Once you’ve secured your first personal loan, it’s crucial to use it responsibly to start building a positive credit history. Here are some tips:

Make all payments on time
Set up automatic payments if possible
Keep your balance low relative to your credit limit
Don’t apply for too many new credit accounts at once
Monitor your credit report regularly for errors

According to a report from Experian, it typically takes 3-6 months of credit activity before you’ll have enough history to generate a credit score. Consistently managing your first loan responsibly during this period can help establish a strong foundation for future borrowing.