Is it possible to get a loan with no credit check?
Yes, now there are lenders who offer borrowers in an emergency situation installment loans with no credit check, but this is far from an advantageous offer. These lenders offer extremely high interest rates that can be very difficult to repay.
Why no credit check loans seem the best way out
While each of us needs emergency funding from time to time to cover expenses, some loan options are more than unprofitable, and no credit loan is one of them. Such loans are designed for borrowers who have bad credit and most often cannot repay the loan debt. Thus, often loan with no credit is a way into a debt trap from which it can be very difficult to get out.
Such loans are extremely expensive and it may be nearly impossible for a borrower with bad credit in a difficult life situation to repay them. Sometimes the annual interest rate on a loan with no credit check reaches 400%, which is much higher than online lenders or credit unions have. Thus, study the basic information about this type of loan, the risks associated with it and the alternatives that you can use to cope with emergency expenses.
What is no credit check loan and what’s wrong with this option?
As you know, in order to get a loan, you often need to meet certain eligibility criteria. Most lenders will ask for a credit check in order for your application to be approved. However, now there are lenders who are ready to provide loans with no credit check.
For example, if you are applying for a Payday Loan, then a credit check is not required, but you must provide proof of income and an active bank account. The loan is also short-term and must be paid on the next payday. Requirements may vary depending on the lender chosen and state laws, however most lenders do not ask for a credit check. However, it is recommended to use this type of loan only in an emergency when you have no other options. This type of financing has extremely high interest rates of about 400%. Moreover, if you are unable to repay the loan on time, you will also have to face late payment penalties. Thus, often those borrowers who apply for a Payday Loan, pay much more than the original loan amount.
Some online lenders also offer loans with no credit check which are paid off within a few months. Despite the fact that the repayment terms are longer than with the Payday Loan, the interest rates are also very high.
Thus, it is quite clear what is wrong with no credit check loans - they have such high interest rates that it is almost impossible to repay. In other words, you shouldn't use this loan if you have other options to look out for.
Alternatives to no credit check loans
As mentioned, no credit check loan is the last option to consider in an emergency, so before applying, explore alternatives that may help you cover your costs.
- Credit union. Some credit unions even offer loans to people with poor credit so that they can cope with emergencies. Most of them offer small loans, so you will most likely receive around $ 500 (or more depending on the credit union and eligibility criteria). What's more, many credit unions offer interesting options such as starter credit cards or loans that help build credit. Often, interest rates charged by a federal credit unions are around 18%, which is much more profitable than no credit check loan.
- Online lenders. You can also consider online lenders who offer loans for borrowers with bad credit. Typically, such lenders have higher interest rates than credit unions, however the offer is still much more favorable than no credit check loan. Some online lenders provide loans even for people whose credit score is below 600, while others pay attention to factors such as employment and income. Thus, if you meet the basic requirements and prove that you receive regular payments, you will most likely be able to get a loan offer.
- Payday Alternative Loans. You may have heard that these credit union-issued loans help borrowers avoid the debt traps that Payday Loans create. Examine how PALs work to see if this option is right for you.
- Credit-builder loan. You should also be aware that some financial institutions offer borrowers an option that helps them build a credit - this is a credit-builder loan. This type of financing works differently from a traditional loan: your loan amount is held in a savings account and you pay it back in regular monthly installments. After the amount has been fully repaid, you will have access to the money. If you made regular monthly payments, then your credit history will be improved.
- Secured Loan. You may be more likely to get a loan if you offer your property (such as a car) as collateral for the loan. Borrowers offering secured loans do not often ask for a credit check because your loan is already collateralized. However, if you are unable to make payments, the lender will be able to collect your car in order to consolidate the loan debt.
Why is it so difficult to get a no credit check loan?
Lenders check credit history to get an idea of how likely it is that the borrower will repay the loan on time. Since no lender wants to risk their money, they want some kind of guarantee that the debt will be paid off. Thus, if you do not have a credit, it will be much more difficult for you to get a loan, since the lender will not be able to study your credit report and make sure of your reliability.