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According to the latest figures from the Federal Reserve, 30% of U.S. adults had student loan debt upon leaving school.

Student loan debt is a significant financial burden for many Americans, impacting their ability to save, invest, and achieve financial milestones. As higher education costs continue to rise, more students and families rely on loans to fund their education.

Understanding the scope and scale of student loan debt in the United States is crucial for grasping its economic and social implications. Keep reading to learn how many Americans have student loan debt, the average amount borrowed, student loan debt by demographics, and more.

How Many People in the USA Have Student Loans?

The total student loan debt crisis amounts to $1.74 trillion in unpaid student loans as of the second quarter of 2024. This outstanding balance is spread among 43.2 million U.S. borrowers.

Federal student loans account for 91.2% of all U.S. student loan debt, according to the Education Data Initiative. However, U.S. adults are also burdened by private student loans.

As of Q3 2023, Americans have amassed a total of $130.28 billion in private student loans — accounting for 7.5% of outstanding student loans in the country.

Recommended: The Impact of Student Loan Debt on the Economy

Who Is the Typical Borrower?

The College Board’s Trends in College Pricing and Student Aid 2023 report found that the average four-year, public bachelor’s degree graduate left school with $27,400 in student debt. Bachelor’s recipients from private nonprofit institutions left school with an average of $33,600 in student debt.

Student Loan Debt by Age

U.S. adults ages 35 to 49 have a total aggregated balance of $635.7 billion in federal loans across 14.7 million borrowers. On average, a borrower in this age group has a student debt balance of $43,200, according to College Board.

Age	Total Balance	Average Balance per Borrower
Up to age 24	$103.4 billion	$14,600
25 to 34	$497.5 billion	$32,900
35 to 49	$635.7 billion	$43,200
50 to 61	$297.4 billion	$45,700
62 and older	$112.8 billion	$41,600

The next-highest total balance, at $497.5 billion, falls on borrowers ages 25 to 34. The 15.1 million borrowers in this age group have an average loan balance of $32,900.

Borrowers with the highest average balance ($45,700) are those who are 50 to 61 years — this group accounts for 6.5 million borrowers in the U.S.

Student Loan Debt by Race and Gender

According to the Education Data Initiative, 64% of the total U.S. student loan debt is held by women.

Men borrow an average of $29,862 in student loans. By contrast, each woman carries an average of over $30,000 in student debt.

Race/Ethnicity (Women)	Cumulative Debt
Asian	$25,252
Black or African American	$37,558
Hispanic or Latina	$27,029
White	$31,346

Black women face the greatest hurdle when it comes to student loan debt. According to AAUW, Black or African American women carry the highest cumulative student debt by race and ethnicity at $37,558. This figure includes the principal amount and student loan interest rate charges.

Student Loan Borrowers by Debt Size

According to the U.S. Department of Education, most student loan borrowers (9.9 million as of 2023) owe between $20,000 and $40,000. Close to half of all borrowers (42%) owe between $10,000 and $40,000, and only one million borrowers have student debt totaling $200,000 or more.

Recommended: What Is the Cost of Attendance in College?

How Many People Have Student Loans by Demographic?

According to the Education Data Initiative, middle-income students are most likely to take out student loans. For students living on campus, 63.6% used federal student loans, compared to 39.7% of students who lived with their parents.

Among married undergraduates, 52% accepted federal loans. 54.1% of independent undergraduate students relied on federal student loans to help fund their education.

Recommended: Examining the Different Types of Student Loans

What Percentage of College Students Take Out Student Loans?

The percentage of students who borrow student loans vary based on factors like degree type and institution.

According to the Education Data Initiative, 31.5% of undergraduate students accepted student loans from the federal student loan program.

About 52% of bachelor-seeking students attending a private nonprofit received federal student loans, while 49% of bachelor’s students enrolled at a public college received federal loan aid.

Among master’s degree students, 53.6% who attended a private nonprofit school received federal aid, compared to 52.5% who attended a public institution.

Finally, 79.5% of students pursuing a professional doctorate degree at a private nonprofit received student loans. Of those who attended a public college, 31% of doctoral candidates have student loan debt.

Recommended: How to Pay for College

Total Owed by Americans on Student Loans?

Collectively, Americans have an outstanding student loan balance of $1.74 trillion in total. Private student loans makeup $130.28 billion of that, and the rest is federal student loans.

The Takeaway

Americans are carrying a significant student debt burden after leaving school. New and currently enrolled college students will likely see continued rising education costs.

Despite these figures, one of the benefits of student loans is that they can provide access to college for students who might otherwise not be able to finance their education. To pay for college, students can turn to cash savings, scholarships, grants, and federal and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

Who holds the majority of student debt?

According to the College Board, borrowers ages 35 to 49 hold the majority of outstanding federal student debt at $635.7 billion, with an average balance of $43,200 per borrower.

What is the average student debt in the U.S.?

According to the Education Data Initiative, the average federal student loan debt as of 2024 is $37,843 per borrower. Counting private student loans, that number is $40,681 per borrower.

What is the total amount of student debt owed by Americans?

Americans owe $1.74 trillion in federal and private student loans as of 2024.

How do you get rid of student loan debt?

To get rid of student loan debt, you can make consistent payments, consider refinancing for better rates, apply for income-driven repayment plans, or seek loan forgiveness programs if eligible. Strategies like budgeting and making extra payments can help accelerate debt repayment and reduce the total interest paid.

What happens to student loan debt when you die?

When a borrower dies, federal student loan debt is typically discharged and does not need to be repaid. For private student loans, policies vary by lender; some may discharge the debt, while others may require repayment from the borrower’s estate or a cosigner if one exists.

How does student loan debt affect the economy?

Student loan debt affects the economy by reducing borrowers’ purchasing power, delaying homeownership, and impacting savings and retirement plans. High debt levels can limit consumer spending and hinder economic growth. Additionally, it may discourage potential students from pursuing higher education, affecting workforce skills and overall economic productivity.

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Photo credit: iStock/Prostock-Studio

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Please borrow responsibly. SoFi Private Student Loans are not a substitute for federal loans, grants, and work-study programs. You should exhaust all your federal student aid options before you consider any private loans, including ours. Read our FAQs. SoFi Private Student Loans are subject to program terms and restrictions, and applicants must meet SoFi’s eligibility and underwriting requirements. See SoFi.com/eligibility-criteria for more information. To view payment examples, click here. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Unsecured credit cards, which don’t require a form of collateral to use them, tend to be the most popular kind of credit card. In addition to helping you build credit, these cards often come with perks and benefits, like cash back rewards or free travel insurance.

To decide if an unsecured credit card is right for your financial situation, read on. You’ll learn what an unsecured credit card is, how it works, and the pros and cons of using one.

What Is an Unsecured Credit Card?

When you think of what a credit card is, you’re most likely thinking of an unsecured credit card. An unsecured credit card is a line of credit that gives cardholders the ability to use credit at their whim. In other words, as a cardholder, you can use your credit up to its limit and pay it off continuously, with no end date. Unsecured credit cards get their name since they don’t require a deposit or collateral, unlike secured credit cards.

Depending on the credit card you qualify for, you might be able to receive some additional benefits and perks with an unsecured credit card like cash back rewards.

How Does an Unsecured Credit Card Work?

You’ll receive a credit limit when you open an unsecured credit card. Your credit limit is the maximum credit you can use on this account. You must pay at least the credit card minimum payment each billing cycle if you’ve used the card. Here are some points to know:

•  Your monthly payment will vary depending on how much credit you used during that billing cycle (in fact, some months, you may even have a negative balance on your credit card).

•  If you miss a monthly payment, you’ll likely have to pay a penalty or fee for the infraction.

•  If you make only the minimum monthly payment, your remaining balance (plus accrued interest based on the APR on a credit card) will carry over until the next month.

So, to avoid penalties, fees, and accrued interest, it’s best to pay your balance in full every month.

But, if this isn’t feasible with your budget, aim to pay more than the minimum every month so you can quickly chip away at your total outstanding balance. Just be sure to keep in mind how credit cards work when deciding how much to pay in a given month.

Pros and Cons of Unsecured Credit Cards

Some of the benefits and drawbacks of unsecured credit cards may be obvious. But, to help you determine the risks and rewards of using this type of credit card, here are some pros and cons to get familiar with.

Pros

Upsides of unsecured credit cards include:

•   Higher credit limits: Applicants usually must have a competitive credit score to qualify for an unsecured credit card. For this reason, credit card companies may apply a higher credit card limit since you’ve proved your creditworthiness.

Also, having a higher credit limit can impact your credit utilization ratio, the amount of credit you use compared to the amount of credit you have available. Your credit utilization ratio is used to assess your credit score, and a higher ratio may negatively impact your score. With a higher amount of credit available, it’s easier to maintain a lower ratio.

•   Potential to earn rewards: Many unsecured credit cards offer incentives like cash back or airline miles to encourage cardholders to use their credit. They may also offer additional benefits, such as complimentary airport lounge access or hotel credits. So, when comparing your unsecured credit card options, be sure to look at all perks and rewards that may be offered.

•   Frequently reports credit history to credit bureaus. Since card issuers take on more risk by lending credit to cardholders, they usually report your credit activity to the credit bureaus on a monthly basis.

Your credit usage is another factor used to determine your credit score, so these regular reports can help you assess how well you’re managing your credit. If you’re managing it well, these frequent reports can help your score.

•   An abundance of options: Unsecured credit cards are the most popular type of credit card. Therefore, there’s a vast array of credit card options at your disposal. Because there are so many options, you’ll likely be able to find one suitable to fit your needs.

Cons

While there are many advantages of using an unsecured card, some may come with some downsides, including:

•   Varying approval requirements: Every credit card company usually has different credit card approval requirements, and you’ll generally need a higher score to qualify for an unsecured versus a secured credit card.

For example, some secured credit card requirements are a credit score of at least 580; others may require a score of at least 680. Researching requirements beforehand can help you identify the best cards available that you can qualify for with your credit score.

•   Extra fees: Some unsecured cards may come with extra fees, such as convenience fees, cash advance fees, or foreign transaction fees. Keep in mind that not all cards charge these fees, though, so it’s worth it to compare your options based on your needs. For example, if you travel abroad often, you may want to choose a card that doesn’t have foreign transaction fees.

Pros	Cons
Higher credit limits	May charge additional fees such as convenience fees, balance transfer fees, or cash advance fees
Wide range of credit card options available	Different credit requirements for approval
Rewards such as cash back or miles
Usually report to credit bureaus

Unsecured vs Secured Credit Cards: What Are the Differences?

The most significant difference between unsecured versus secured credit cards is that secured cards require a deposit while unsecured cards don’t. Your deposit on a secured credit card usually dictates your credit limit. Depending on the credit card company and your credit score, your deposit may vary between $200 and $3,000, which is far lower than the average credit card limit.

Requiring a security deposit eliminates some of the creditors’ risks; thus, it can be easier to qualify for a secured credit card than an unsecured credit card. Keep in mind, no matter what type of card you have, you’ll find the most favorable terms if you have good credit, such as a good APR for a credit card. Also, you may have to forgo any rewards while you build your credit with a secured card, as they don’t often offer them.

If you fall behind on your payments, your creditor could cancel your card and send your remaining outstanding balance to a third-party collector with either an unsecured or a secured credit card. However, if you have a secured credit card and your payment is past due, your creditor may keep your security deposit to pay off some of the remaining balance.

Beyond these few items, there is no other real difference between the inner workings of a secured credit card and an unsecured credit card.

•  Each card allows you to make purchases at locations that accept credit card payments.

•  During the billing cycle, you must make at least a credit card minimum payment.

•  Otherwise, you may have to pay fees or penalties with your secured or unsecured credit card.

	Secured Credit Card	Unsecured Credit Card
Requires a refundable deposit	✓	X
Can qualify with poor credit	✓	✓
Can come with rewards	✓	✓
Requires at least a minimum payment every month	✓	✓
Used to make purchases	✓	✓

Who Should Consider an Unsecured Credit Card?

Since there are plenty of unsecured credit card options available, they can suit the needs of many different types of consumers. If you’re in the market for a new credit card, here’s how to decide if an unsecured card is right for you.

The Budgeter

If you’re big on budgeting, you can use an unsecured credit card as a tool to help you as you make a budget and stick to it. Many credit issuers offer online statements or apps that can make it easy to track all of your spending right on your phone.

But, if you’re going to use your credit card for all of your spending, make sure to keep the interest in mind. While unsecured credit cards can help you budget, they can also hinder you if you get into the habit of overspending.

The Frequent Flyer

Do you love spending your time on the move? Many unsecured credit cards provide travel rewards that help you earn free travel experiences. For example, some cards can come with reward points or miles that you can use toward booking airfare or accommodations.

You may also receive additional perks like annual hotel credits, access to airport lounges, or discounts on flights when using miles.

The Business Owner

Unsecured credit cards are also useful for business owners. Business owners can capitalize on the perks of unsecured credit cards like rewards, sign-up bonuses, and other benefits. Also, an unsecured card can provide short-term funding for business growth. Plus, it can help businesses build credit for future financing endeavors.

Of course, benefits and terms will vary depending on the type of card you choose.

Typical Requirements to Apply for an Unsecured Credit Card

When you apply for an unsecured credit card, you must meet certain criteria to qualify. Some common requirements when applying for a credit card include:

•   Be at least 21 years of age. While this is generally the age required to get a credit card, if you’re over 18 and can prove you have an income, you may qualify.

•   Provide proof of income to demonstrate you can make the minimum payments.

•   Be a U.S. citizen or have the authority to work in the U.S.

•   Have an acceptable credit score range per the lender’s requirements.

•   Provide personal information such as your name, age, address, Social Security number, and more.

Keep in mind that all credit issuers have different criteria for approval. Some credit issuers may give you the option to pre-qualify. This way, you can see if you may qualify without submitting a hard inquiry on your credit, which can impact your credit score.

The Takeaway

Unsecured credit cards can come with many perks, such as earning cash back rewards and helping you build credit. But, before you apply for just any old card, make sure to compare your options, keeping the average credit card interest rate in mind, and understand the criteria for approval. Identifying an unsecured credit card that’s suitable for your needs might take a little time, but it’s worth it.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

Is it good to have an unsecured credit card?

If you can handle an unsecured credit card responsibly, it can help you build credit. Also, it can be a good way to receive additional benefits, such as cash back or other rewards, for completing your daily transactions.

What credit score do I need for an unsecured credit card?

Typically, if you have a credit score of 579 or less, credit issuers may be reluctant to approve your application. To qualify for the most competitive rates and offers, you typically want to have a credit score of 670 or higher.

How long before I can get an unsecured credit card?

If you’re working on building credit and don’t qualify for an unsecured credit card, you may have to start with a secured card. But, the amount of time you must use your secured credit card before you graduate to an unsecured time can vary from a few months to several years. Ultimately, it will depend on factors like your current credit score and the criteria of the unsecured credit card you’re applying for.

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Photo credit: iStock/Zhonghui Bao

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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The allure of a quick loan can be hard to resist when there is a pressing need for immediate cash. The amount of money needed might not be a lot, but it’s needed quickly. Looking for that small loan, though, might lead to lenders who might charge high interest rates and offer loan terms that are difficult to meet.

This is called predatory lending, and it works in the best interest of the lender, not the borrower.

When you know what to look for in a reputable lender, however, it becomes easier to avoid becoming a victim of predatory lending practices.

Guide to Predatory Loans and Avoiding Them

Information and education are a consumer’s best friends when looking for any type of loan. For small loans that seem only to be available through lenders that seem less-than reputable, those two things become even more important.

One piece of information that is important when looking for a loan is knowing what your credit report contains. Consumers can access their credit reports at no charge through AAnnualCreditReport.com. Personally identifiable information, such as your name, current and previous addresses, and your Social Security number, are easy to verify.

Making sure other items on your credit report are accurate is also important because this information is used by lenders to assess your creditworthiness. Lenders want to know how many credit cards and loans you have, if you make your debt payments on time, and other factors.

When you have a picture of your overall creditworthiness, it’s time to find a reputable lender to work with. It’s a good idea to compare several lenders to find one you feel comfortable working with and is a good match for your financial needs.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. One question can save you many dollars.

What Is Predatory Lending?

Predatory lending often targets consumers with poor credit, no credit, low incomes, lack of education, and for other unfair and discriminatory reasons.

Lenders who offer financial products that are typically considered predatory loans do not have the best interest of their clients in mind — their goal is to make a profit at the expense of their client, even if that means engaging in misleading tactics.

Predatory lending may often mean a short-term, high-interest loan that a borrower might have difficulty repaying, potentially leading to a cycle of debt.

Recommended: What to Know Before You Borrow Money Online

Predatory Lending Tactics and Practices

Reputable lenders are likely to be transparent about their interest rates, loan terms, and any fees they might charge, such as a personal loan origination fee or prepayment penalties.

Those engaging in predatory lending, however, may not be as transparent. They may try to hide important details about a loan and steer an applicant toward a loan they may not be able to afford.

To make sure a lender is not engaging in predatory lending practices, here’s a look at some things to avoid.

•   An unlicensed lender: A reputable lender will be licensed in the state they are doing business in and will be expected to uphold certain professional standards set by the Nationwide Multistate Licensing System (NMLS)®. Consumers can look up the license status of individual and institutional lenders through NMLS Consumer Access℠ .

•   Rushing during the loan process: If you feel like a lender is hurrying you along without addressing your questions or concerns, you might wonder if they’re trying to hide some details about the loan terms or trying to approve you for a loan you might not be able to afford. A reputable lender will take the time to make sure you understand the documents you’re signing at the loan closing and that the loan works for your financial needs.

•   High interest rates and fees: A lender who offers only a high interest rate, one you don’t feel you can afford, probably doesn’t have your best interests in mind. Doing some research on typical interest rates available for your credit score and common fees charged — and comparing lenders who work within those parameters — is a good way to filter out predatory lenders.

•   Overpromising: A lender who tells you they can approve you for a loan regardless of your credit history is likely promising something they won’t be able to deliver on. Lenders typically have thresholds at which they are willing to loan money, outside of which they may decline an applicant.

Recommended: What Is Considered a Bad Credit Score?

Common Types of Predatory Loans

Three common predatory lending examples are payday loans, auto (or title) loans, and subprime mortgages.

Payday loans may come to mind when thinking of predatory loan examples. These types of loans target those who are looking for quick cash and may not think they will qualify for anything else.

Often short-term loans for small amounts, typically $100 to $1,000, payday loans are generally meant to be repaid with the borrower’s next paycheck. They are typically unsecured loans and often have high interest rates. A payday lender may refer to a “fee per $100 loaned” instead of disclosing the annual percentage rate (APR). This tactic hides the extremely high APR that is typical for a payday loan — on average, 400% APR, but can be much higher.

Similar to payday loans, auto title loans are an example of a predatory loan that is often made to an applicant who cannot qualify for a more mainstream loan. The borrower’s vehicle is used as collateral against the loan, with the borrower signing the title over to the lender. If the loan is not repaid, the lender keeps the title and has ownership of the vehicle.

Subprime mortgages are another predatory lending example.

This is a type of mortgage made to a borrower who may not be able to qualify for a conventional mortgage based on the prime rate. Because the lender may perceive this borrower as an increased lending risk, they may offer an interest rate higher than that of a prime mortgage to offset this risk.

What Are Good Lending Practices?

A reputable lender will work with you to find the loan option that best meets your financial needs. That’s not to say it won’t be beneficial to them, but it will be good for both lender and borrower. Just as there are some ways to identify predatory lending, there are ways to identify a lender that does business in an honest manner.

•   Licensed lender. Reputable lenders typically display their lending license for potential clients to see. If you’re meeting with a lender in their office, you may see their license framed and displayed on a wall. If you’re working with an online lender, look for their license information on their website. It might be on their About page, Legal page, or FAQ page.

•   Answering your questions. When you have questions about a lender’s loan options, terminology in the loan agreement, or general lending questions, a reputable lender will take the time to answer them and help you understand the process.

•   Competitive interest rates. Generally, lenders offer a range of rates based on the creditworthiness of each applicant. But they will be competitive with other lenders making the same types of loans.

•   Realistic offers. A lender that has your best interest in mind will do what they can to approve you for a loan that you can afford, not one that you will be at risk of defaulting on. A happy client could mean referrals to other potential clients, and that is generally something a lender strives for.

💡 Quick Tip: Just as there are no free lunches, there are no guaranteed loans. So beware lenders who advertise them. If they are legitimate, they need to know your creditworthiness before offering you a loan.

What Can Be Done if You Are a Victim of a Predatory Loan?

One of the first things you can do if you believe you’re a victim of predatory lending is submit a complaint with the Consumer Financial Protection Bureau (CFPB). The bureau will send the complaint to the lending company and work to resolve the issue. The lending company communicates with both the client and the CFPB about the complaint, generally within 15 days with a final response in 60 days.

All complaints submitted to the CFPB are logged in the public Consumer Complaint Database, which can be a good place to check when comparing lenders you’re considering doing business with.

Personal Loans as an Alternative to Predatory Loans

When you need to borrow money quickly, a predatory loan like a payday loan may not be your only option. Lenders offering personal loans are fairly easy to find in today’s marketplace, and many of them are online lenders, which can make the process more streamlined.

If you’re considering a loan as a method to build your credit, a payday loan may not be the right financial tool. Many payday lenders don’t check an applicant’s credit report when making the loan, nor do they report payments to the credit bureaus. Essentially, even if you make regular, on-time payments, your credit score will not benefit from your diligence.

A reputable personal loan lender, however, will check an applicant’s credit report during the loan approval process and report payments to the credit bureaus. In this case, making regular, timely payments can have a positive affect on your credit profile — and not doing so can have a negative affect.

Recommended: Typical Personal Loan Requirements Needed for Approval

Are Smaller, Short-Term Loans the Same as Predatory Loans?

There are reputable lenders that offer short-term loans for small amounts of money. Predatory lenders will exploit a person’s need for quick cash by trying to trick them into an unfair loan agreement they can’t afford. A reputable lender, on the other hand, will work with you to get a loan for the amount of money you need and that you can afford.

Some lenders do have minimum amounts they will lend, sometimes $3,000 or $5,000. If you don’t need this much money, you’d be better off looking at other lenders. There are lenders that will lend smaller amounts, though — even less than $1,000.

What is the Smartest Way to Get a $5,000 Loan?

A smart way to find a $5,000 unsecured personal loan is to compare interest rates and fees of lenders who loan small amounts. This is easily done through an online personal loan comparison site or by calling a few different lenders. It probably won’t be too difficult to find multiple lenders to compare, as $5,000 is a fairly common personal loan amount.

A good first place to consider is your current bank or credit union. They may offer rate or fee discounts for current customers.

Online lenders may have shorter loan processing times, so if you need the money quickly, that could be a good choice.

Comparing lenders, however, is the smartest thing you can do when you’re looking for a loan.

The Takeaway

There are times in life when a quick infusion of cash is needed to help deal with a financial emergency or other need. To avoid falling victim to predatory lending, it’s a good idea to step back and take some time to compare lenders. Getting a loan from the closest payday lender on the block will likely mean paying extremely high interest rates and fees, and difficulty paying off the loan in a short amount of time.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Is predatory lending a crime?

Many states have enacted anti-predatory lending laws. Some states have completely outlawed payday lending, while others have placed caps on the amount lenders can charge. However, many violations go unpunished because consumers aren’t aware of their rights.

What are the most common predatory loans?

The most common types of predatory loans include payday loans, car title loans, and subprime mortgages.

What APR is considered predatory?

Predatory loans generally have interest rates in the triple digits. Loans with annual percentage rates (APRs) no higher than 36% are considered affordable loans.

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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We aren’t born with a credit history and, ironically, one of the only ways to build a credit history is to take out credit — which can be hard to do if you don’t have any credit history. Does that mean if you have little to no credit history, you can’t get a personal loan?

Not necessarily. But you may have a harder time qualifying for a loan with favorable interest rates. Read on to learn why a credit score is such an important factor in the loan application process, how to qualify for a personal loan without a substantial credit history, and how no-credit-check personal loans work.

What a Personal Loan Is and How It Works

Personal loans are a type of lending product that allows consumers to borrow money to use for a wide variety of purposes. There are typically few limitations on what you can use a personal loan for, unlike a mortgage or student loan that dictates what the borrower can spend the borrowed funds on.

Personal loans are available through banks, credit unions, and other lending institutions. With this type of loan, you receive the proceeds (or principal) in one lump sum then repay it, plus interest, in fixed monthly installments over the term of the loan.


💡 Quick Tip: Before choosing a personal loan, ask about the lender’s fees: origination, prepayment, late fees, etc. SoFi personal loans come with no-fee options, and no surprises.

What Is a Credit Score?

A credit score is a three-digit number used to predict how likely you are to pay your bills on time. Your credit scores (yes, you have more than one) are calculated using information from your credit reports. Different companies use different credit scoring models, but most take the following factors about a person’s financial history into account:

•   Bill-paying history

•   Current unpaid debt

•   Number and type of loan accounts you currently have

•   How long current loan accounts have been open

•   How much available credit is currently being used

•   New applications for credit

•   Financial events like debt in collections, bankruptcies, or foreclosures

When you apply for a loan, the lender will typically take your credit score into account to determine if they should lend you money, how much money they should lend you, and at what interest rate. The higher someone’s credit score is, generally the easier it is to qualify for lending products with low interest rates.

There are many different types of credit scores and scoring models. Your credit score depends on the credit scoring model used by the lender you’re applying with. Each lender also has its own personal loan credit score requirements.

How Do You Find Your Credit Score?

While you may not be able to track down every potential credit score you have, there are some easy ways to learn your FICO® credit score, which is one of the most widely used credit scoring models. This can give you an idea of what your scores likely look like across the board.

•   Credit card or other loan statements: You can often find your credit score by looking at your monthly credit card or loan statements or by logging into your account online.

•   Nonprofit counselors: If you’re working with a nonprofit credit counselor or HUD-approved housing counselor, those professionals can often provide you with a free copy of your credit report and credit score.

•   Credit score services: You may be able to get your credit score for free from a credit score service as part of a free trial. But be careful about getting locked into a service that charges a monthly fee.

•   Credit reporting agencies: You can buy your score directly from the credit reporting companies.

Recommended: How To Read A Credit Report

What You Can Do if You Don’t Have a Credit Score

If you’re trying to get a personal loan with little to no established credit, you may run into some challenges. Here are some steps that can help.

Establishing Credit

First-time personal loans for no-credit-history borrowers can be hard to get. To get around this hurdle, you’ll want to start establishing credit. One way to do this is to become an authorized user on a trusted friend’s or family member’s existing credit account. Another way is to apply for a secured credit card backed by collateral. With each option, as you make on-time payments, you’ll begin to establish a credit history.

Finding a Cosigner

Another option that can make it easier to qualify for credit products without a strong credit history is to add a cosigner (or co-applicant) to a loan or credit card. When lenders see that someone else (someone with good credit) is willing to make payments on the original borrower’s behalf (if they fail to do so), they have a lot more confidence in lending them money.

Using Collateral

Adding collateral to a personal loan means that the lender has something they can seize and use to recoup their losses if the borrower defaults on their payments. For example, auto loans are secured by the car the loan is financing. Before using collateral, a borrower needs to make sure they can make their loan payments on time each month or they risk the lender taking possession of their collateral.

Personal Loan Options With No Credit History

If a borrower is really struggling to find a personal loan because they don’t have a credit history, they can pursue a loan that doesn’t require a credit check. This type of lending product does exist but often comes with high interest rates and fees to make up for the risk the lender feels they are taking on.

In some cases, loans that don’t require credit checks, like payday loans, can be predatory, so consumers should make sure they know what they’re getting into when taking out this type of personal loan.

Applying for a Personal Loan With No Credit

Some lenders offer personal loans with no credit check. Since they can’t rely on your credit history, they will typically focus on other indicators of your ability to pay back the loan, such as your income, employment history, rental history, and any previous history with the lender. When applying for a personal loan with no credit check, it’s important to read the fine print and carefully weigh the benefits against the costs. Lenders will often charge higher interest rates and impose more fees to lessen their risk.


💡 Quick Tip: With average interest rates lower than credit cards, a personal loan for credit card debt can substantially decrease your monthly bills.

Checking Your Personal Loan Rate

If you’re in the market for a personal loan, it’s a good idea to research different lenders to find one that’s best for your needs. As you compare lenders, take note of their minimum credit requirements, loan amounts, repayment terms, funding time, and whether or not they offer joint, cosigned, or secured loans (which may help you get a lower rate).

Once you’ve identified a few lenders you prefer, it’s time to prequalify – this only involves a soft credit check and gives you a preview of the loan offers you may receive, including your estimated annual percentage rate (APR).

SoFi offers personal loans with competitive fixed rates and same-day funding. Checking your rate takes just a minute.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

Can someone with no credit score get a personal loan?

Some lenders offer personal loans with no credit check. These lenders will look at other indicators of your ability to pay back the loan, such as your income, employment history, rental history, and any previous history with the lender. No credit check loans may come with higher rates and fees, though, so you’ll want to read the fine print.

How hard is it to get a personal loan with no credit score?

It isn’t necessarily hard to get a personal loan without a credit score, as personal loans for no-credit-history borrowers do exist. The bigger challenge is to get approved for a personal loan with a low interest rate and that doesn’t require collateral or a cosigner.

Do no-credit-score, no-cosigner loans exist?

Yes, loans that don’t require a credit check or a cosigner do exist. However, these loans may come with sky high interest rates and less-than-ideal terms.

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Photo credit: iStock/Yaroslav Olieinikov

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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