Are you financially strapped but can’t get a loan from the bank? If your credit history is a problem, a bad credit loan with no credit check may seem like a viable option. There are several lenders out there that may be able to help you out.
The advertisements sound a little something like this:
“Bad credit or no credit? No problem. Apply for a loan with us and receive funding fast.”
It sounds good. However, you can end up worse off than before with no credit check loans for bad credit. We will take a closer look at how they work and why you should avoid them if possible. But first, here are some great lenders that offer alternatives.
Consider Alternative Lenders for Bad Credit
If you have a bad credit score, you may assume that taking out a personal loan with no credit check is your best option. However, you may be surprised to find that there are online loan options for people with bad credit.
The best way to find these types of installment loans is by using a lending marketplace. Instead of lending you the money themselves, a lending marketplace matches you with direct lenders who are willing to work with you.
Listed below are our top lending recommendations for bad credit borrowers.
Loan Amount$250 – $5,000
Minimum Credit ScoreFlexible
MoneyMutual is a great option for anyone looking for a short-term loan up to $2,500. The online loan process is quick, and you can receive the funds within 24 hours.
The interest rates and loan terms vary, so you’ll have to apply to see what you qualify for. However, MoneyMutual is not available to borrowers that live in New York and Connecticut.
Loan Amount$500 – $10,000
Loan Term3 – 72 months
Minimum Credit ScoreFlexible
CashUSA offers bad credit loans up to $10,000, so this could be a good choice for anything that needs a slightly larger personal loan. To qualify for a loan through CashUSA, you will need to bring in at least $1,000 per month in income.
The APR range is between 5.99% and 35.99%, depending on your creditworthiness. But the company is willing to work with all different types of borrowers, regardless of your credit history.
Loan Amount$500 – $10,000
Loan Term3 – 60 months
Minimum Credit ScoreFlexible
Bad Credit Loans offers online loans between $500 and $10,000, with an APR range between 5.99% and 35.99%. The application process is pretty straightforward, and you can receive the funds as soon as the next business day.
The company has been in business since 1998 and has built a solid reputation for helping people with a bad credit score receive personal loans. You will need to provide proof of income before you can apply on the company’s website.
How No Credit Check Loans Work
If your credit history is thin, or if you’ve recently seen a drop in your credit score, you might be tempted to apply for a no credit check loan. When applying for a traditional loan, your credit score is crucial since it reflects your financial stability and your level of risk. However, this is not the case for no credit check loans.
Like traditional installment loans, no credit check loans allow consumers to access larger sums of cash and make payments over time.
A hard credit check is not required. However, the borrower will only need to provide proof of income and banking information for consideration. Upon approval, funds are usually disbursed within one business day.
The Benefits of No Credit Check Loans
The primary benefit of a no credit check loan is that your credit score doesn’t matter. No matter how poor your credit history is, you won’t need to worry about qualification. This means you can quickly proceed with your loan application.
If your credit history is thin then this kind of loan might be tempting, to help build credit.
The application process for no credit check loans is fast and convenient. Many lenders offer online no credit check application, meaning you can get the process rolling without leaving home.
Because there’s no credit check, funds can be with you in a matter of hours, depending on the loan type.
Because the application process for no credit check loans is comparatively fast, these loans will appeal to those who are in dire need of cash. Especially if you need a small amount of cash to handle a financial emergency.
Traditional loans require multiple financial statements aside from your credit score. On the other hand, a no credit check loan requires only basic documents that you’ll usually have to hand already.
Why You Might Want to Steer Clear
Unfortunately, there are major drawbacks to no credit check loans.
Excessive Interest Rates
No credit check loans cater to high-risk consumers with poor credit history and severely limited borrowing options. So, the APRs are often exorbitant to hedge against the risk of default. In fact, you may notice rates that like what you’d find with payday loans.
The chart below illustrates different scenarios for a $1,000 fixed-rate, 5-year, traditional or no credit check personal loan:
|TOTAL INTEREST PAID
OVER LIFE OF LOAN
|No Credit Check Loan
|150% – 199%
|$125 – $166
|$6,500 – $8,960
|Traditional Loan with
|Traditional Loan with
|Traditional Loan with
Loan origination fees are common with both traditional and no credit check loans. But these loans are sometimes accompanied by steep late payment and early termination fees if you decide to pay off the loan early.
Extended Repayment Period
Unlike payday loans, no credit check personal loans have a longer repayment period. This may seem like a gift if the monthly payments are affordable, but it’s actually a curse in disguise. But why? The interest rate is already high, so only making the monthly payment lets the lender collect more interest from you over time.
Automatic Payment Withdrawals
Furthermore, equal installments are automatically withdrawn from the borrower’s bank account each month until the loan is paid in full.
This could be problematic if you encounter another rough patch and the funds aren’t available in your bank at the time of withdrawal. Chances are you’ll incur an overdraft or NSF fee, and the loan issuer will assess an additional fee for the returned payment.
Alternatives to No Credit Check Personal Loans
Loan products vary by lender, so having poor credit scores doesn’t necessarily mean you can’t get approved for a traditional personal loan. In fact, some lenders, both brick-and-mortar and online, offer personal loans that are designed for subprime consumers.
So, spend some time researching your options instead of settling for a no credit check loan. You may qualify for a more competitive product with a lower rate.
Keep in mind that some lenders, like NetCredit, offer pre-qualification tools on their websites. This enables you to input a few pieces of information, and be screened for loan offers with no impact on your credit score. It also helps you narrow down your options before submitting completed loan applications.
Visit Your Financial Institution
It’s also worth paying a visit to your financial institution to see what loan products you may qualify for (if you haven’t done so already). You may be approved even if you don’t meet the qualification criteria based on your existing relationship with the bank.
If this approach doesn’t work or if you’re an unbanked consumer, try credit unions and community banks. Their lending criteria are sometimes a bit more lenient.
Get a Cosigner
Consider getting a cosigner instead of settling for a no credit check loan to save a bundle on interest. Why so?
“Having a cosigner on your loan gives your lender additional assurance that the loan will be repaid,” notes the Consumer Financial Protection Bureau (CFPB).
Having someone with good credit in your corner who is willing to assume liability should you default on the loan may make the lender more willing to approve you.
Borrow the Funds From Family or Friends
As evidenced in the charts above, personal loans with no credit checks are quite costly. But if you borrow money from family or friends, you’ll probably pay little to no interest and save yourself a bundle. Just be sure to make room in your budget to repay the funds promptly to avoid burning bridges.
Start Rebuilding Your Credit Score
It never hurts to take strides to improve your credit score. But before doing so, you’ll need to confirm the contents of your credit report, since it determines your FICO score. And there’s a possibility that inaccurate information on your credit reports is dragging your credit scores down.
So, grab a free copy of your credit report. Review the entries and look for errors. If you find any, file a dispute with the three major credit bureaus to remove the incorrect information.
(For additional guidance, click here for a comprehensive guide on credit report disputes). But if what you see is correct, here are some simple actions you can take to start rebuilding your credit:
- Get current and stay current on all your existing debt obligations.
- Make payment arrangements with your creditors if you can’t afford the monthly payments.
- Accelerate your debt repayment efforts to lower your credit utilization ratio.
- Refinance or renegotiate interest rates to make monthly payments more affordable. (This reduces the likelihood of missing payments in the future).
- Refrain from applying for new credit.
It may take some time to improve your credit score, and taking out a personal loan with no credit check may be your only option. However, you’ll be in a much better position going forward if you decide to apply for another loan.
A Word of Caution
If you decide to apply for a no credit check loan, do your homework to ensure you’re dealing with a reputable lender.
Scores of fraudsters know that some consumers are in dire financial straits and will accept almost any form of relief. And dealing with a shady lender could leave with a mountain of debt or even worse, you could become a victim of identity theft.
How to Spot Loan Scams
While there are plenty of safe bad credit loan options, there is no shortage of predatory loan companies targeting those who are struggling financially. That’s why it’s important to know how to spot the difference between a legitimate lender and a scam.
No Credit Check
A reputable lender will never guarantee your approval for a loan without at least checking your credit history first. Most lenders will want to see your credit report, income, and other financial documents before even considering your loan application.
While many lenders will require things like an approval or origination fee, these fees are always deducted from the total cost of your loan. If a lender is requesting upfront payment, in any form, they’re unlikely to be trustworthy.
A reputable lender will never pressure you into making a decision, or taking urgent action regarding your loan. Legitimate lenders will give you the time you need to make your decision as well as adhere to the repayment terms you agree upon.
Never deal with a financial institute or lender that doesn’t have a physical address. Even online lenders will be registered to a searchable business address.
You should find a physical address for any good lender on their website. This is one of the easiest ways to identify an illegitimate lender.
Scammers will often use online platforms to market both poor credit and debt consolidation loans. No legitimate lender will make first contact with you regarding a loan.
Yes. It is absolutely possible to borrow money without going through a hard credit check. No credit check loans are available, as well as credit building loans and loans that only conduct a soft credit check.
No credit check loans are a type of loan that doesn’t require a hard FICO score credit check from the applicant. These hard credit checks can damage your credit score. For that reason, people with bad credit scores are wary of making things even worse by applying for a traditional loan.
While a no credit check loan may seem like an easy choice to take at first, there are always risks.
If you are unable to fulfill your repayment obligations, the debt accrued from no credit check loans can be devastating. It’s important to inform yourself so that you can make a responsible decision.
Traditional loans involve a hard credit check upon formal application. A hard credit check entails examination of your financial history, including any previous loan activity. If you’ve got a history of delayed payments and loan defaults, finding approval for a traditional loan might prove difficult.
On the other hand, a soft credit check doesn’t affect your credit score. This usually involves examining more basic aspects of your financial history, but also can include information about previous lending history.
Either way, you can be confident that a soft credit check won’t have an impact on your credit score.
A major benefit of no credit check loans is that they are easy to apply for. Most will have a simple online application process and offer same-day loan funding. Applicants generally need to provide basic personal information, as well as any documentation regarding employment, income, and bank account details. However, some loans don’t require a bank account.
Lenders will review and verify the information, and typically perform a soft credit check to confirm your eligibility for a loan. This soft check reviews any current loans, recent repayment history and your overall credit utilization.
Once this check is complete and the lender is satisfied with you as a borrower, they will disburse funds to your bank account.
Lenders check the credit of applicants to responsibly assess the level of risk they represent financially. Lenders would rather not lend money to consumers who are likely to default on their loans.
Moreover, lenders will also reserve their most competitive interest rates to borrowers who have a strong history of making payments on time.
If your credit score is below 580, you may struggle to find loan approval with traditional lenders. However, besides no credit check loans, there are plenty of bad credit lenders who are happy to deal with people who have poor credit scores.
Whether you’re considering a no credit check loan or some alternative, the key as a consumer is always to be well-informed and responsible. With so many funding options, it’s crucial to fully evaluate your needs and know your limit. Unless you’re completely comfortable with the terms and conditions, it’s okay to decline.
So whether you’re looking for a no credit check loan, HELOC, peer-to-peer lending, or some other type of financing, research is the key. Also, be sure to check into your own credit score and credit history before you start shopping, so you know what to expect.
When it comes to no credit check personal loans, know the risks and ensure that your lender is trustworthy.