Introduction
Whenever you are seeking to get your first loan you probably do not have any credit history, and if you do have one, it’s very likely short. For this reason, a lot of people who are going for their first loan will use a cosigner. These are the people who have a good credit history and are willing to sign the loan application beside you. However, this person must also understand that if you are unable to make your loan payment, they will assume responsibility for it. While having a cosigner can be beneficial to you, finding one can be a challenge. Therefore, you should know that it is possible to obtain your first loan without a cosigner.
Step 1
Get a credit card and start building up your credit history. This is a good thing to do before you apply for your first loan. It will help establish a positive credit report for you. It doesn’t matter if this is a secured or unsecured credit card as long as it is from a major bank. You could also do the same thing with a credit card from a retail store.
Step 2
Once you have credit cards it’s vital that you manage it properly. You really do need a solid credit history and a good credit score if you want to get your first loan without the help of a cosigner. This means making all of your monthly payments on time. By keeping your credit card balances as low as possible you will be improving your credit score. Lenders will factor this into your debt to income ratio (the percentage of your income that is spent on making monthly debt payments) whenever you go for your first loan.
Step 3
Show your lender that you have a steady income. If you are currently unemployed or if you have any gaps in your employment, it may hurt your opportunity to be approved for a loan. Of course, different lenders will have different requirements. Some of them will require you to show them a copy of your tax returns for the past 2 years. This is especially true if you are seeking a mortgage loan. Otherwise you may simply need to show the lender your paycheck stubs for the past 3 months. If you are unable to provide any of this documentation, you will need to have a cosigner.
Step 4
Have collateral available to use in securing your first loan. This may be either a car title or other valuable, personal property. It is important to have this available if you are applying for your first loan and don’t have a cosigner.
Step 5
You may need to agree to pay a higher interest rate on your first loan. This is especially true if you don’t have a long credit background or a cosigner. It is important to understand that if a lender does decide to charge you a higher interest rate on this loan your monthly payment on the loan will be more.
Tips
Take some time to shop around in order to ensure you get good loan terms at a rate that you can afford.
Sources and Citations
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