Guide to No Credit Check Loans

What is a no credit check loan?

A no credit check loan is a type of loan that you get without going through a hard credit check.

Before approving a loan, most lenders want to see your credit file, which includes a list of your accounts, balances and minimum payments. Each credit report also documents late payments and other information about your financial habits. A no credit check loan dispenses with this requirement, making it easier to qualify if you have a low score or limited credit experience.

How no credit check loans work

There’s no guaranteed approval with this type of loan. In other words, just because the lender is willing to skip the credit check, doesn’t mean you won’t be denied the loan. Before disbursing any funds, a bank, credit union or consumer financing company needs to know that you can repay the loan.

They assess your ability to pay by collecting the following information:

• Employment status: It’s easier to repay a personal loan if you have a steady job. You may not have to go through a credit check, but you do have to provide proof of employment.
• Banking history: Your bank may be willing to approve you for a no credit check personal loan if you have a positive account history. For example, if you’re 30 and have had an account at the same bank since you were a teenager, your personal banker may be willing to skip the credit check if you’ve never had a bounced check or any other banking issues.
• Income: When determining your ability to repay a personal loan, the lender needs to compare your income with the amount of funding requested. If you want a $20,000 loan and have an annual income of $40,000, you’re unlikely to be approved. See our guide on loans for low income borrowers.
• Debt load: In addition to reviewing your bank account activity and verifying your income, a lender may also ask you to provide information about your debts. For example, you may have to provide a list of open accounts and their minimum monthly payments.
• Availability of collateral: Before approving you for a personal loan, a lender may require you to put up collateral. In the financial industry, collateral is a valuable asset that you use to secure a loan. If you don’t pay back the personal loan as agreed, the lender is allowed to seize your collateral, sell it and use the proceeds to cover your loan balance. If you want a no credit check loan, you may have to put up your vehicle, a piece of expensive jewelry or some other type of collateral.

Types of online loans with no credit check

Whether you have poor credit or no credit, you still have options.

For example, many companies offer payday loans and personal installment loans. Here’s what you need to know about these alternatives to credit-check loans:

Payday loans

A payday loan is a short-term, high-interest loan designed to be paid back with your next paycheck. For example, if you get paid on September 15 and take out a payday loan on the same day, you’d have to pay it back on September 29. This assumes that you get paid biweekly.

Some lenders offer payday loans with extended repayment plans. If you can’t afford to repay your no credit check loan on your next payroll date, an extended repayment plan allows you to make smaller payments over time.

When you take out this type of no credit check loan, you have to give the lender a bank account number and a routing number. This makes it possible for the lender to deposit the funds directly in your bank account instead of giving you a check to cash.

Personal installment loans

If you have no credit, you may qualify for a personal installment loan issued by a lending company. This type of no credit check loan allows you to repay a lump sum of money over several months or years. For example, if you take out a no credit check loan with a 36-month term, you have 36 months to pay back what you borrowed. If the loan has a fixed interest rate, you’ll pay the same amount of money every month until the loan is paid off.

Who qualifies for a no credit check loan?

Remember, there’s no guaranteed approval for no credit check loans.

Generally, you need to earn enough income to make the lender confident in your ability to pay back a personal loan or a payday loan. You may also need to provide collateral or prove that you have steady employment.

Be prepared to provide the following information when you apply for a no credit check loan:

• Proof of income: Gather your pay stubs and recent tax returns to make it easy for the lender to verify your income.
• Proof of bank account: If the lender wants to deposit the proceeds of your no credit check loan in your checking account, you’ll need to provide the account and routing numbers. You should also provide bank statements in case the lender wants to see your balance.
• ID: Even if the lender doesn’t require a credit check, they do need to verify your identity. Be prepared to show your driver’s license, state-issued ID card or passport.

Tips for choosing a no credit check loan

Before agreeing to any loan terms, take the following steps to find the best no credit check loan for your needs:

• Find a lender that reviews your repayment ability. If the lender doesn’t verify your ability to repay the loan, there’s a good chance they’ll want you to take out another loan to repay the first one. This makes it easy for you to get trapped in a cycle of debt.
• Check the APR. This stands for annual percentage rate, which is how much it costs to borrow money expressed as a yearly percentage. The APR includes fees and interest, so it helps you determine how affordable a loan is.
• Review the repayment terms. Before you sign a loan agreement, read the terms carefully. You need to know the loan term (how long you have to pay it back), the interest rate, the APR and the total amount of fees charged. For example, many companies charge origination fees, which are fees charged to review your application and fund a loan. It’s also important to be aware of any prepayment penalties. A prepayment penalty is an extra fee that’s tacked on if you decide to pay off the loan early.
• Ask to see the amortization schedule. In banking lingo, an amortization schedule is a table showing how much of each payment goes toward interest and how much goes toward the principal of the loan. This table also lists your payment dates and payment amounts.
• Check for a lender’s license. Some states require every lending company to obtain a license to operate. To ensure you’re dealing with a reputable company, check to make sure your lender has all required licenses and permits.
• Watch out for scammers. If you have no credit or a negative credit history, it’s a little tougher to qualify for credit cards, loans and other credit accounts. Scammers take advantage of this by offering loans that are too good to be true and disappearing after you’ve given them your personal information. Avoid scammers by reading online reviews, checking for business licenses and taking other steps to confirm that you’re working with a legitimate company.

Are no credit check loans a bad idea?

In most cases, loans with no credit check are a bad idea.

Compared with the best personal loans, no credit check loans usually have high interest rates and other unfavorable terms, making it difficult to pay them back as scheduled. If you take out a payday loan for a few hundred dollars, you may end up paying back thousands in interest and fees. Except in a true financial emergency, it’s better to wait until you can qualify for a traditional loan. Always calculate the interest on your loan before taking it out to make sure you can afford it.

Alternatives to loans with no credit check

If you don’t want to take out a no credit check loan, here are some alternatives:

• Secured loans: As explained above, a secured loan is one backed by some type of collateral. If you have a valuable asset, a bank or credit union may be willing to lend to you even if your credit history isn’t the greatest.
• Credit union loans: Credit unions offer many of the same services as banks, but they’re owned by their members, so they have different operating rules. As a result, you may qualify for a loan from a credit union even if you’ve been turned down by a bank. A credit union may also charge lower interest rates and fewer fees.
• Online loans: Some online lenders aren’t as strict as traditional banks, so they’re willing to make loans to borrowers with no credit or less-than-stellar credit.
• Cosigned loans: If you can’t qualify for a loan on your own, consider asking a family member to serve as a cosigner. A cosigner is someone who agrees to be responsible for paying back the loan if your finances take a turn for the worse. If you go this route, choose someone with good to excellent credit and make sure they understand the risk involved in agreeing to be a cosignatory.
• Family loans: Another option is to ask a family member for a loan. If you pursue this option, make sure you draw up a formal loan agreement that spells out exactly how much you’re borrowing, how much you have to pay each month and how much interest, if any, the family member expects to charge.
• Payment plans: Instead of taking out a loan, try negotiating a payment plan. For example, if you have a $2,000 hospital bill, in some instances the hospital may be willing to accept $83.33 per month for 24 months.