Where To Get A Loan and How To Qualify For a Loan

Chang Fu
April 16, 2020

Sometimes, you either have too many options for a loan or no options for a loan - that’s just how life works. So how do you figure out the best place to get a loan? There are a few factors that determine where you should get a loan but first, let’s review some basic qualifications to apply for a loan:

Basic qualifications for most loan applications

Most loans have at least the following requirements:

Bank account. This allows the bank, online lender, or other financial institution to disburse money to you when you get the loan and to charge the account when it’s time to repay. There are a few types of loans like payday loans and pawnshop loans in which you can receive the money in cash rather than in a bank account.

Identification. Type of identification can vary but a driver’s license or state ID should work. Lenders use your identification to reduce the risk of fraud and make sure they’re following the proper state and federal regulations on lending. If a loan doesn’t require any type of identification, that could be a red flag that the lender is not legitimate.

Proof of Income. Most loans, especially those at higher loan amounts, will require proof of income through a paystub, tax statement, or verification with your employer. For example, mortgages and unsecured personal loans will require proof of income - how would your lender get paid back on the loan if you don’t have an income? However, there are a few exceptions, such as student loans and certain short-term secured loans such as pawnshop loans and title loans that may waive the requirement.

Credit score. Most unsecured loans including unsecured personal loans will require a credit score check. Lenders conduct a credit check to get a sense of whether you’ll repay the loan back and what your current credit situation looks like. However, whether you have bad credit, good credit, or excellent credit, Possible Finance doesn’t care. We don’t check your FICO or Vantage credit scores when we approve you for a loan. No credit check loans also do not require a credit check.

Can I qualify for a loan with no income or no job?

Yes, that’s definitely possible but the choices available to you will be limited. Most financial institutions will not lend to those without an income or job.

If you have no job but still have money coming in through alimony, child support, unemployment benefits from the state or federal government, social security checks, or something else, that’s still considered income! You will be able to qualify for:

  1. A loan from Possible Finance
  2. Some small-dollar unsecured loans like payday loans and personal loans
  3. Select credit cards and lines of credit (depends on lender) if you have a good credit score
  4. Many types of secured loans like title loans, pawn shop loans, and more

However, if you have no income at all, you are mostly limited to secured loans where you put up some type of collateral like a car title or a valuable possession to guarantee payment. If you can’t repay the loan, your lender has the right to repossess the collateral you used to take out the loan. In addition, you’ll be subject to higher interest rates than normal. Interest rates are usually calculated in the form of an annual percentage rate of interest (APR). These types of loans are available if you have no income:

  1. Pawnshop loan secured by a valuable possession
  2. Online title loan secured by your car
  3. Some home equity lines of credit secured by your home
  4. Student loan if you are using funds for education

Can I qualify for a loan with bad or no credit?

First, what is considered bad credit? Usually, if your credit score is under 650, you will have a tough time qualifying for most credit cards, personal loans, and other traditional bank products like mortgages and auto loans. Therefore, under a 650 credit can be considered bad credit. Experian says as many as 30% of folks have a credit score under 650.

Similar to not having an income or a job, having bad or no credit will limit your loan options. Why does your credit score affect your loan options? Your FICO credit score has the following factors, in order of approximate importance:

  • Current amounts owed
  • Repayment history
  • Length of credit history
  • New credit and current credit mix

Banks and financial institutions use these credit factors to predict whether you’ll pay back the new loan you’re requesting.

So what are your options with bad or no credit history? Below are a few to look at:

With most of these options, there’s no credit score requirement. However, some lenders may still pull your credit file to check for specific things, even if your credit score will not be impacted. Be sure to ask your bank, financial institution, or loan provider if you are concerned about them checking your credit score or credit history.

If you have a good credit score or an excellent credit score (higher than 750), most loan options are available to you such as mortgages, personal loans, credit cards, and more. Because there are more options and lots of financial institutions that can provide services to you, do your research and compare the options available to you. APR, loan repayment terms, and the structure can be compared across the options so you can select the best loan proposal for you.

What to consider before getting a loan

Before getting a loan, you should consider the following:

What are you using the money for?

If you have an emergency expense that’s come up - rent/utilities, medical bills, car repair, childcare, etc. - you likely have a loan amount you’re looking for. It’s probably difficult to defer some of these bills, unless it’s due to the coronavirus so obtaining the money to pay these bills is important if not crucial to keep your minimum standard of living. Be astute and compare options but leave the door open for higher APR and less appealing loan options in case you need them. If you are trying to get a loan to buy a product or service, or to close a temporary gap in income, take a close look at your finances first and ask yourself if you can forego the purchase or reduce your expenses before taking out a loan.

How fast do you need the money?

Banks, credit unions and other financial institutions that provide loans have various timelines for disbursing the loan funds to you. Application times can also vary significantly. Application times for payday loans, shorter-term loans, and a Possible loan can be as short as a few minutes while application times for personal loans, mortgages, and larger dollar loans can be an hour up to a few days. Funds for the loan can also be disbursed in multiple ways, usually cash, debit card, or ACH. Many payday, pawnshop, and title loan lenders can disburse loan funds in cash on the spot. Most short-term and smaller-dollar lenders, as well as Possible Finance, can disburse funds to a debit card which takes several minutes for the money to arrive. Lastly, most loan providers will default to ACH which can take 1-3 business days. This form of disbursement along with a wire transaction are most common with personal loans, mortgages, and larger dollar loans.

Will you be able to repay the loan according to the scheduled payments?

Whether you plan on paying according to the schedule or not, get a loan that’s as flexible as possible. Most lenders will have a grace period for payments - a period where even if you’re late on paying, you won’t be charged additional fees or interest. Don’t be afraid to contact or work with your lender directly if you can’t make a payment. For example, during the coronavirus pandemic, most lenders are allowing customers to defer payments up to 60 days later. Banks, credit unions, and other financial institutions don’t want you to default on your loan. Instead, they’d rather work with you to meet your budget and get your loan paid back.

Do you want your payments on the loan to be reported to the credit bureaus?

Many high-interest rate short-term loans like payday loans, pawn shop loans, title loans and more do not report payments to the three major credit reporting bureaus - TransUnion, Experian, and Equifax. However, they may report to alternative credit reporting bureaus. Be sure you understand whether your payments will be reported and to whom because it will affect your credit score, either negatively or positively. According to myFICO, payment history makes up the largest part of your credit score at 35%. Loans from Possible Finance are reported to all three major credit reporting bureaus even though Possible Finance doesn’t use your credit score when determining whether you qualify for a loan. Repaying on time can help build credit history.

Types of Loans and Lenders that Offer Them

So, where can I get a loan, you ask? There are so many lenders and so many places you can get loans, you wouldn’t even be able to count them all! However, there is a right type of loan and lenders that are a better fit depending on your unique situation. We’ll go through seven types of loans below along with lenders to look into for each.

Mortgages and Home Equity Loans

Mortgages, home equity loans, and home equity lines of credit are secured by a property. Borrowers get a mortgage usually when they purchase a home. Once you have a home and have equity (value) in a home, you may qualify for a home equity loan and take out a loan against that equity - this is often done for major home renovations and projects. Home equity lines of credit is a revolving line of credit similar to a credit card where you can borrow against a certain limit using the equity in your loan as collateral for the line of credit.

These loans all have one thing in common - they are secured by a home, which is a very valuable piece of property. According to a 2018 CNBC report, the median home value in the US is $218,000! Because lenders are more protected and the government additionally guarantees some of these loans through Fannie Mae, interest rates tend to be the lowest vs many other types of loans. The application process, however, can be long and complicated, taking as long as multiple weeks and there are usually loan origination, appraisal, and other types of fees associated. An appraisal is usually conducted on the property to calculate the value. Most mortgages are 15, 20, or 30 years in term and repaid monthly while most home equity loans are shorter in duration and are also repaid monthly. Lines of credit can be for an indeterminate time since they act similarly to a credit card with a total borrowing limit.

HousingWire has the top 10 mortgage lenders in volume as of 2018. We cover a few below:

  1. Wells Fargo - Similar to other major banks like JP Morgan Chase, Bank of America, and more, Wells Fargo offers many banking products and services. Mortgages are one of Wells Fargo’s most important products and you might find one of the lowest rates there. Depending on the season and the situation at each individual bank, they’ll be more or less aggressive on mortgage rates and terms. But it’s always worthwhile to get a quote from one of the major banks like Wells Fargo, especially if you have good or excellent credit. For those with higher credit scores, Wells Fargo and other major banks could be the cheapest option!
  2. Quicken Loans (also called Rocket) - An online lender, you should expect a no frills and no in-person communication involved. You might expect lower prices since there’s less overhead involved but you should still compare rates and fees. For many borrowers, it can be similar to a traditional bank, just very different in approach. The application is online and if you have all your files and information handy, you can finish everything in one sitting.
  3. LoanDepot - The name of the company might be odd but they do a lot of mortgages every year for consumers. Although it doesn’t have the brand name of Wells Fargo, Quicken, and others, you should expect their rates, fees, and processes to be similar. For a mortgage, you’ll want to value service and the repayment process through reviews but the biggest considerations might very well be your monthly payments, the interest rate, and fees.

The same lenders and more will also do home equity loans and lines of credit as well so when you’re in need of those products, be sure to get a quote from your mortgage lender as well as a few competitors.

Personal Loans

A personal loan usually refers to an unsecured loan that’s 1 to 5 years in length, repaid in installments monthly, and is anywhere from $1000 to even $50,000. Interest rates can vary significantly depending on your credit profile and income. One of the biggest advantages of a personal loan (along with a payday or short-term loan) is that you can use the funds for whatever you’d like. It’s also not secured by collateral, meaning that if you don’t pay back the loan, the lender cannot repossess a specific property. However, that doesn’t mean you don’t need to pay back your loan. If you fail to pay back your loan, you could see a significant drop in your credit score and the lender can take legal action against you among other repercussions.

The application process, fees, and interest rates will vary significantly by the lender and your credit and income profile. Below, we list a few lenders that are good for certain situations. Please research and read reviews on each of these lenders to make sure they are the best solution for your unique situation.

  1. Possible Finance - Although a shorter-term loan with higher interest rates, a Possible loan through the Possible Finance mobile app has many of the primary attributes of a personal installment loan such as ability to build credit history and repayment in multiple installments. It differs in that the interest rate is higher than 36% (the ceiling for most personal loans) and your FICO and Vantage credit scores don’t matter. So if you have bad credit or no credit at all, went through bankruptcy, or are faced with lower income or an emergency expense, Possible Finance may be a good option for you.
  2. SoFi - SoFi is an online lender that provides a variety of products including personal loans. Their loans usually start at around 6% APR and can go up significantly depending on your credit and income profile. You’ll need at least an average or good credit score above 650, and likely above 700 to qualify. Since the process is all online, expect faster application items than a traditional bank or lender and funding is likely ACH to a bank account.
  3. Avant - Avant is another online lender that has personal loans, meant for those with a lower credit score than customers of SoFi. Borrowers can expect to qualify or get approved more in the 625 to 700 credit score range, although the APRs will range significantly depending on your credit score and income profile. The application process as well as funding will be similar between Avant, SoFi and Possible Finance.

Payday Loans

Payday loans, also called payday advances and cash advances, is a short-term loan, usually up to $500 and repaid on your next payday within 2 weeks. APRs for payday loans vary, ranging from 200% up to 700% and average about 400%. Brick and mortar payday stores allow for cash funding (immediately) as well as debit card (same-day) or ACH funding (takes 1-3 business days). Online payday lenders will usually have a debit card as well as ACH funding for the loan. The application process can take anywhere from a few minutes to 15 minutes depending on the lender and most lenders will not check your credit score but may do a credit inquiry (it doesn’t hurt your credit score).

Depending on your credit score and your personal situation, a payday loan may be useful to you. But be aware that many payday lenders make money through customers being stuck in a debt trap cycle in which the borrower can’t repay back the existing loan and have to roll over the existing loan into a new loan with higher and higher fees. Possible Finance prevents this in various ways including breaking out payments into bite-size chunks, allowing longer repayment times for you to catch your breath, and reporting payments to the credit bureaus so that you can build positive credit history and graduate to cheaper and better credit score products

Some of the largest payday lenders in the US are:

  1. CashNet
  2. Speedy Cash
  3. Ace Cash Express
  4. Advance America

We won’t review these one by one since many of them operate in similar ways. If you live in Seattle or Columbus, we have specific reviews of some of the payday lending options in the Seattle, Washington area and the payday lending options in the Columbus, Ohio area.

Pawn Shop Loans and Title Loans

Pawnshop loans and title loans are similar to payday loans in that they usually charge high-interest rates (annual percentage rate of interest) and are short-term term, a max of 1-2 months usually. They differ in that pawnshop and title loans are secured by collateral, a valuable possession in the case of a pawn shop loan and an automobile or vehicle in the case of a title loan. Because these are secured loans and the lender only gives you a loan amount that’s a proportion (ie. 50-60%) of the appraised value of the item that you are using as collateral, it is relatively low-risk for the lender. The APRs are still high though, around 100-200% for most pawnshop loans and online title loans.

Pawnshops and title lenders don’t tend to check your credit score when you apply but application processes can be tricky. You’ll need an appraised value for your valuable possession (such as jewelry, electronics, art) or your auto vehicle. Make sure you’re not low-balled on the appraised value of your item! Approval rates tend to be higher than most personal loans and higher credit score products because even if the lender doesn’t trust you to pay back the loan, they can repossess the possession used as collateral and sell that possession.

The biggest pawnshop and title loan companies in the US include:

  1. EZCorp
  2. First Cash
  3. TitleMax
  4. LoanMart

We won’t go over these in detail either but you should find application processes, fees, and other aspects similar. Be sure to get competitive quotes if you’re looking to get the best rates and highest loan amount.

Auto Loans

Borrowers take out auto loans when they purchase a used or new vehicle. Most auto loans have terms of 3 to 6 years and the principal and interest are repaid monthly in a monthly payment. The auto loan is secured by the title of the car or vehicle. If you can’t pay back your auto loan, the lender has the right to repossess your vehicle. As you’d imagine, this can get tricky if you’re driving and taking off with your vehicle and your lender needs to hunt you down. But that’s actually a rare case because almost all auto loans involve some sort of identity check as well as a hard credit inquiry. If you have bad or no credit, your options are limited - we review your car loan options with bad credit in this comprehensive article.

There are two major types of lenders for auto loans. One type of lender is a financing company related to the automaker or the dealership. These lenders who are affiliated with, or in many cases owned by the automaker can work hand-in-hand with you during the vehicle purchase and have incentives that reduce your overall interest rate or fees. However, do your due diligence and get competitive auto loan quotes. The financing company affiliated with the auto manufacturer or the dealership may actually have the highest fees and interest rates. Another type of lender is a traditional bank or online lender that’s not affiliated with the automaker or the dealership. Although this will require more work in terms of planning and possibly more paperwork, going through a traditional lender may net you the best terms.

Below are some of the most popular auto lenders:

  1. Capital One Auto Company (traditional)
  2. Wells Fargo Auto (traditional)
  3. Chase Auto (traditional)
  4. Ally Financial (traditional)
  5. GM Credit (affiliated with GM autos)
  6. Ford Credit (affiliated with Ford autos)

Student loans and lines of credit

We won’t get into detail on student loans and lines of credit in our article today. Student loans are unsecured loans taken out for educational use - there are private lender student loans as well as federal student loans. Student loans have a whole different set of rules, regulations, and structure that is different from many other types of loans out there. The consequences of not paying back a student loan can also vary. Lines of credit is similar to a credit card where you have a specific borrowing limit issued by a bank, credit union, or other lender and you can borrow up to a certain amount on the line of credit. APRs (annual percentage rate of interest) can vary and lenders will require at least average credit scores and ideally good or excellent credit. For more about student loans, we recommend reading up on NerdWallet’s student loan page and comparing the options available to you. For more about lines of credit and what they are, they have a summary on personal lines of credit there as well.

Traditional vs online lenders

A common question with the advent of online shopping and new financial technology is - should I go to a traditional lender like a bank or credit union or should I use an online lender? A lot of it actually comes down to personal preference and whether you want to work with someone in person or not. There are some basic differences that you should be aware of:

  • Online lenders may have more attractive rates and fees because they don’t have additional brick and mortar overhead costs. However, this is not always true so compare your options.
  • You may get less support and help from an online lender when going through the application process. It helps to be familiar with how a loan application works.
  • Be careful of online scams. Read reviews for both online and traditional lenders and make sure they’re reputable and on the NMLS access site and found on BBB.
  • You’ll need a smartphone or internet as well as an online bank login for most online lenders. If you don’t have an online bank login or don’t use a bank or credit union at all, you’re stuck with mostly traditional short-term higher-interest lenders.

How to determine whether a lender is legitimate

As we mentioned earlier, read up on the reviews on the lender. You can access reviews at a few places but focus on 3rd party sites that are unaffiliated with the lender. Here are a few examples:

  1. The Better Business Bureau has a listing of companies and their reviews.
  2. The iTunes Store and the Google Play Store may have reviews if your lender has an app (like Possible Finance on the iTunes and Google Play Store).
  3. 3rd party review sites like Nerdwallet and others may be a good option. However, beware and read the fine print. It’s possible that the review is actually an advertorial sponsored by the lender themselves.
  4. Check the Nationwide Multistate Licensing System (NMLS) Resource Center to make sure the lender is listed and doing business with a license.
  5. Lenders should have their licenses, privacy policy, terms and conditions, and legal information displayed on their site either near the footer or somewhere in the site.
  6. Ask for a 2nd or 3rd opinion from your friends or family. If they’ve heard of the lender or if they do research and arrive at a similar conclusion to you, that’s even better!

What to do if you keep applying and you constantly get rejected

At Possible, we have customers who constantly get declined by banks and other financial institutions and we know that’s super frustrating. In fact, that can feel really unfair!

It’s worth researching deeper to determine how you can get approved for a loan. Here are a few questions to ask yourself or the lender you applied with:

  1. Was I rejected based in part on my FICO or Vantage credit scores or some other credit check? Lenders are required to disclose when they run a credit check and you’ll want to know whether your credit history is having an impact on whether you are approved for your application. For most types of personal loans, credit cards, mortgages, etc. your credit score has a huge impact. In fact, most lenders will have a minimum credit score to be approved.
  2. Was I rejected due to no income or no bank account? Many lenders and financial institutions require a bank account to deposit the loan funds and to collect payment from. In addition, many unsecured loans, since there is no collateral to repossess if you cannot pay your loan, require a minimum income to get a loan. We know that’s tough when you don’t have a job, especially in this current economic environment with the coronavirus pandemic.
  3. Was I rejected due to state or federal regulatory reasons. There are both federal and state laws in regards to lending. For example, to prevent fraud and money laundering, lenders need to verify your identity through ways like driver’s license, proof of residence, and social security number (SSN). In addition, many states have rules around short-term loans and other types of loans. For example, in the state of Florida, you cannot have more than one short-term loan active or not fully paid off since if you apply with a reputable lender like Possible Finance and you already have a loan with someone else in Florida, we cannot approve you due to state regulations in Florida.

Alternative financial support and assistance if you can’t get a loan

Well, you’ve tried everything you can think of and you can’t get a loan from anyone whether that’s a major bank like Wells Fargo or Chase, an online lender like SoFi or Avant, a payday lender like CashNet or installment lender like Possible Finance. Here is some alternative financial assistance you can look to:

  1. During the Coronavirus pandemic, there are all types of covid-19 financial support including government checks, unemployment benefits, and more. Our comprehensive guide takes you through some options to claim your benefits, delay your existing payments, get more income, and more.
  2. Do you have family and friends that will lend a hand? None of us like to borrow or ask for money from those closest to us but if it’s a time of need for you, it might not hurt to give family and friends a try.
  3. There are federal and state grants and benefits you might qualify for. Don’t give up and try to get the financial assistance you need.
  4. Payday Alternative Loan and other Credit Union help - Credit unions and other financial institutions may have alternative programs to help potential borrowers like you, even if you don’t qualify for their traditional products. Ask your local lender in the area about these programs to see if you qualify.

Final Verdict

Finding where to get a loan might seem easy with all the choices out of there but depending on your specific situation and what you need the money for, it can take more thought and planning than you first realized. We hope this resource has been helpful in going through the types of loans, how to qualify, the various lenders, and what to consider before you decide on your final lender.
If you need an installment loan that’s repaid back over multiple months and is far cheaper than traditional payday loans and bank overdrafts, look no further than Possible Finance. Borrow up to $500 with bad or no credit. Repay the loan in installments over multiple pay periods and build credit history.

Chang Fu

Chang is an avid writer, among other things, at Possible. He grew up loving reading and writing, creating his own poems and even a book he's now hidden in an old closet, unpublished. His financial experience at a large bank along with his passion for technology to help underserved communities inspires him to write for Possible.

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