Getting a peer-to-peer loan without a cosigner or on bad credit isn’t impossible but you need to know the tricks
Getting any type of loan can be frustrating and getting a personal loan with bad credit can seem downright impossible. I know the feeling. After destroying my credit in 2008, I didn’t think I could get a loan to save my life.
I had a horrible credit score, nobody to act as a cosigner and tens of thousands in debt that was keeping me from getting back on my feet.
I was forced to learn everything I could about loans and credit. It was the seed that started this blog and one of the most important things I learned was that you don’t need credit or a cosigner to get a loan.
If you know how the system works, you can get a loan on any credit score.
Let’s look at how a cosigner helps to get a loan application approved first and then how to get a personal loan without a cosigner.
How Does a Cosigner Help with a Loan?
Any time you apply for a loan, whether it’s from a traditional bank or a personal loan site, they pull your credit report and FICO score. That’s how they estimate the interest rate on your loan and whether you’re likely to pay it back.
Any lender that claims not to look at your credit report or score is either a scam or just plain lying.
Now if you’re in the same spot I was after the financial crisis, the loan officer is probably going to look at your credit report and either break out laughing or quickly ask you to leave. Yeah, my credit was that bad!
Maybe I’m not being fair to the lenders. I had bad credit because I wasn’t able to make payments on credit cards and rental property mortgages. Why should they think I was going to pay this new loan back?
Banks aren’t in the ‘helping you out’ business. They’re in the business of lending money and getting it back with interest. If your credit report says you might not pay back the money, they’re either going to flat out deny your loan application or charge an interest rate you can’t afford.
When someone comes on as a cosigner to your loan, they’re not only vouching that you’ll pay back the money but also putting their money on the line to pay it back. If your cosigner has good credit then the lender is better assured that they’ll get the money back either from you or from the cosigner.
I’ve seen students with no credit score and no credit history get a loan because their parents had excellent credit.
Do You Need Good Credit or a Cosigner for a Loan?
You can get a loan with good credit. You can get a loan with bad credit if you have a cosigner. But can you get a loan with bad credit and no cosigner?
There’s really two questions here and I’ll answer both.
First is the question of whether you can get a loan with bad credit or no credit at all. The answer here is ‘Yes’ and I’ll walk you through the process in the next section. It might not be easy because you’ll need to know which personal loan sites specialize in bad credit loans, but you can get a loan with just about any credit score.
The other question is whether you can get a loan without a cosigner, even if your credit is so bad that it makes getting a personal loan impossible? This one is a little harder but I’d say the answer is still that you can…if again, you know how the system works.
How to Get a Personal Loan with No Credit
Getting a personal loan with bad credit or no credit at all can be tough but it’s all a matter of knowing where to look.
Your first step, if you have the time, is to take a month or two to boost your credit score as much as you can. I realize that’s not usually an option for most people but still wanted to offer a couple of quick fixes that might get you lower rates when you do apply for a loan.
- Pay down as much of your credit card debt as possible without putting anything else on your credit. Card debt is the worst kind for your FICO score and paying it down, even if you have to get a short-term loan from friends and family, will boost your score fast.
- Get your free credit report and dispute some of the bad marks that are holding your score down. Even if you can get just one or two of these marks off your report, your credit score could jump 20 or 30 points.
- If you just don’t have much credit history, start using a credit card to pay for groceries and other necessities. Make sure you pay the balance in full each month and it will help you build credit and your score.
For most people with bad credit, waiting a couple of months to get a loan isn’t an option. We never seem to think about our credit score until it’s too late but that’s just how it is.
Getting a personal loan with no credit and no time to increase your score means you probably aren’t getting any love from the bank. They have strict rules for lending to anyone with a subprime credit score around 680 FICO.
Instead, you’ll have better luck with some of the online lenders. You might still get denied on some like SoFi and Lending Club because of high score requirements but there are others like PersonalLoans.com that specialize in bad credit loans.
I’m adding a table here of the best personal loan sites I’ve used and reviewed, including important info for each.
| Peer to Peer Lending Site | P2P Borrower Fees | Minimum Credit Score | Loan Rates | Notes |
|---|---|---|---|---|
| Personal Loans Click to Check Your Rate | 5% | 580 | 9.95% to 36.0% | Three options including P2P Loans, Bank Loans and Personal Loans. |
| BadCreditLoans Click to Check Your Rate | No Fees | 520 | Vary by state | No fees and lowest credit requirements with p2p lenders. |
| Payoff Click to Check Your Rate | 2% to 5% | 660 | 6% to 23% | Specializes in loans to payoff credit cards. Low origination fee and no hidden fees or charges. |
| Upstart Click to Check Your Rate | 0% to 8% | 620 | 5.67% to 35.99% | Best for graduates and no credit peer loans. |
| SoFi Loans Click to Check Your Rate | No Fees | N/A but probably around 680 FICO | 5.99% to 16.49% (fixed rates) 5.74% to 14.6% (variable rates) | Low student loan refinancing rates. |
| Lending Club Click to Check Your Rate | 1% to 5% | 640 | 5.95% to 32% | Best combination of low fees and low rates. |
One thing to remember is that all these sites will do a soft-pull on your credit report first to approve your application and estimate a rate. That’s important because it doesn’t affect your credit score and means you can apply on two or three sites to make sure you’re getting the best rate possible.
How Can I Get a Personal Loan without a Cosigner
Sometimes you don’t know anyone with good credit or at least anyone with good credit that’s willing to be a cosigner to your loan. That means you’ll need to look for other ways to get the money you need.
One method is to get included as an authorized user on someone’s credit card. This is similar to being a cosigner but people seem to have less a problem with this than cosigning a loan. As an authorized user, you can then talk to them about using the card to make some of your payments to get out ahead.
Most of the websites in the table above will approve bad credit loans without a cosigner but rates are going to be higher than if you had one. The best course is to apply for what’s called a debt consolidation loan to pay down your credit card balances.
Personal loan sites have easier credit requirements for debt consolidation loans because they know the money is being used for a good purpose. You’re not just getting a loan to go shopping but to pay off some of your other debt. That means you’re more likely to be able to repay the new loan.
If your credit score is above 540 FICO but you’re still getting turned down for a loan without a cosigner, try this strategy.
- Apply for just a few thousand on a one- or three-year loan. The loan payments will be low enough that you should be able to get approved.
- Using the loan to pay down credit card debt will help increase your credit score within a few months.
- Paying off that smaller first loan early also gives the personal loan site the confidence that you repay your loans.
- With a higher FICO score and one loan already paid off, you can usually get a much larger loan on 60-month terms without any problem.
Check your rate on a personal loan up to $40,000 – won’t affect your credit
Can I Get a Student Loan without a Cosigner?
Getting a student loan without a cosigner is usually a little easier for two reasons.
First, there are government programs that back student loans so lenders know they’ll get their money either from you or from the government. Student loans are also one of the few types of debt that don’t get wiped out in a bankruptcy. That means lenders know you’ll have to repay the debt eventually, even if you file bankruptcy.
As with other types of loans, it pays to shop around when applying for student loans. Not only are you more likely to find someone to approve your application but you also have better odds at getting the lowest rate possible.
SoFi and Splash Financial both specialize in student loans though credit score requirements are higher than with personal loan sites. If you’re not able to get a loan through one of these, you might try taking out a personal loan instead of a student loan and then refinancing later when your credit score is higher.
Getting a loan on bad credit or without a cosigner can be frustrating but it’s not impossible. I’ve had 12 loans over the last decade and a few of those were just after ruining my credit. Make sure you understand the loan terms any time you take on debt and always make sure you’re able to make the payments. Bad credit isn’t forever and you’ll be able to get better rates and the best loans in no time.