When you apply for a loan, the first thing your lender assesses is your credit score. It helps the lender in evaluating your creditworthiness. But what if you are starting out and don’t have a prior credit history to show? Does it mean that you cannot be eligible for a loan?
Today, you can easily avail a personal loan for no credit historyfrom several lenders. While it can be challenging, it’s not impossible. Here are some tips to help you.
Take a collateral-based loan
A personal loan is an unsecured credit option. But it is only available to individuals with a high credit score, ideally over 750. If you own any valuable assets, you can easily apply for a loan by pledging it as collateral. The asset will act as a guarantee of your financial capacity to repay the loan on time. You can also apply for high loan amounts based on the value of the asset put as security.
Apply for a low-value loan
If you do not have a prior credit history, requesting a high-value loan may be perceived as risky by the lender. This is because they have no proof of your creditworthiness. In such a situation, it’s best to chalk out a budget for your expenses, determine the sum you need, and apply for a loan amount that you can afford to repay. This way, if the lender is convinced of your loan purpose and repayment capacity, you may even qualify for more competitive personal loan interest rates.
Additional Read: Does Prepayment of Personal Loan Affect Your Credit Score?
Prove your credibility
Your income level plays a major role when you apply for a loan. If you have a stable income source, are employed with a reputed firm, and fulfil the personal loan eligibilityconditions prescribed by the lender,you’ll easily qualify for a loan. Also, you’ll be required to submit relevant paperwork, including bank statements, tax returns, or salary slips, etc., to prove your financial stability.
Get a guarantor
Alternatively, you can apply for a personal loan without credit historywith a guarantor or a co-applicant. You can ask a family member, spouse, or sibling with a healthy credit history and stable income to be your guarantor for the loan. This will increase your chances of getting loan approval. Moreover, before sanctioning the loan amount, the lender will check the co-applicant’s financial stability and credit report.
Request for an NA or NH on your credit report
You can also ask your lender to mark your case with NA or NH on your credit report. This indicates no previous credit activity in the last 36 months or no credit history at all. It will help you in getting a loan without any negative influence on your credit report. However, the lender might offer you the loan at a somewhat higher interest rate.
The bottom line
Looking for affordable personal finance? Then turn to Tata Capital! Get a multipurpose personal loan of up to Rs. 25 lakhs at the most competitive interest rates. We offer a 100% online application process with minimal documentation and flexible repayment tenure.
Use our personal loan EMI calculator and start your EMI planning today!