Almost everyone has a time in their life where they need to borrow money. Car repairs and broken appliances generally seem to occur when you least expect them, and do not have the money in hand. If you have not had credit in the past, don't have check stubs to prove regular income or have a low credit score, you can have a difficult time finding a lender. While you can find lenders who specialize in loans to people with no credit or proof of income, the amount of the loan can be small and you will pay a high interest rate.
If you own a vehicle, you can qualify for a loan without credit checks or income verification using your vehicle as collateral. State laws vary regarding title loans; but if they're available in your state, you can receive a loan minutes after you apply. The documents you need when applying include your vehicle title, identification, references and proof of insurance. Your interest rate can be as high as 25 percent of the value of the loan, according to Marietta Jelks, the editor of the Consumer Action Handbook.
If you are over 18, you can use your belongings as collateral at a pawn shop. State regulations typically mandate the time that the broker must retain your possessions before he can sell them to someone. The amount you receive for your items can be as little as 25 percent of the value, although you may be able to negotiate a higher amount. Pawn shops do not report to the credit bureaus if you do not repay the loan, but they will sell your property. You may be able to pay a maintenance fee to extend the terms of the loan if you cannot pay it back per your agreement.
Friends or Family
You can ask a friend or family member to finance a loan. Typically, they will not verify your credit or ask for proof of income. If you are not able to repay the money, they generally will not report you to the credit bureaus or sue you for payment, but you can damage the relationship if you cannot pay. You should use written documentation that contains the terms of the loan, even with family, says Shirley Anderson with the University of Minnesota Extension Service. Signed documentation can prevent misunderstandings over loan terms.
While loan fees can be high if you do not have a history of credit, they may be your only option until you build your credit history. Asking a friend or relative to co-sign a loan with you can be a way to begin building a credit history, but will require him to pay if you cannot — or do not — pay. Once you receive credit, using it judiciously and making all of your payments can make future credit easier to obtain if your lender reports your account to the credit bureau.
- Quality Personal Loans: What is a Car Title Loan
- USA.gov; The Truth About Car Title Loans; Marietta Jelks
- Rebuild,org; 7 Things to Remember When Getting a Pawn Shop Loan; Francine Huff; May 2009
- University of Minnesota Extension; "Weigh the Options for Family Loans; Shirley Anderson-Porisch; April 2009
- Building or Rebuilding Your Credit