If your credit prevents you from getting a loan, it may be possible to borrow without relying on your credit history. However, you need to be careful when using no credit check loans. These loans are expensive, and they only make sense when all other options are off the table.
Do You Really Need One?
Before using a no credit check loan, make sure that it’s truly the right approach. Your credit may be bad, but it’s always worth applying for a more traditional (and most likely inexpensive) loan.
If they say no, that’s fine – you can always look at other options. But you never know for sure until you ask.
Visit your bank or credit union and ask what your options are for borrowing. If you aren’t buying a car or a home, you’ll most likely want a personal unsecured loan. Those loans allow you to do whatever you want with the money, and they might provide more time for you to pay off the loan than a no credit check loan.
Perhaps most importantly, they’ll come with lower interest rates and fees – so it will cost less to borrow. A lot less. Loans from traditional lenders also help you build credit, while no credit check loans do not.
It’s important to understand that lenders aren’t in business to lose money. If anybody is willing to lend you money without checking your credit, they’re doing it for a price. Make sure you know what that price is before you apply. They’ll typically charge high interest rates along with various fees to compensate them for the risk. If you can avoid paying that price, do so.
In general, it’s best to avoid no credit check loans unless you’re truly out of options.
They should not be used to purchase “wants” or luxuries – they’re best for “needs.” If you need to fix your car so that you can keep getting to work (and earning an income), one of these loans might make sense. The same is true for a medical procedure that you have no other way of funding.
Types of Loans
No credit check loans are typically short term loans that you get relatively quickly.
These generally aren’t loans that you’ll repay over several years; a few weeks or months is more common. They are very much like payday loans, which are expensive short-term loans. In fact, a lot of advertisements for no credit check loans are really just ads for payday loan programs. Lenders don’t make these lending decisions based on your credit score. Instead, they look at your income, and assume that you’ll keep your job long enough to pay off the loan.
Another common type of loan is a longer term loan that you get by pledging collateral. Car title loans, for example, allow you to borrow against the value of your automobile. The lender gives you cash, but in exchange you authorize them to take your vehicle if you fail to repay the loan on time. These loans can be especially problematic if you need your car to get to work and continue earning an income.
Borrowers looking to borrow without credit inquiries are desperate, so scammers are naturally easy to find in this space.
The most common scams involve charging fees while providing nothing in return. Application fees are not unheard of, but beware of lenders who want fees up-front – you might not get what you pay for. Fees should be clearly disclosed up-front. If you get any “surprises, ” start worrying. Reputable lenders tell you what to expect, while scam artists just take what they can for as long as you’ll give it to them. Any fees should be taken out of your loan proceeds after your loan is approved.
You should also pay attention to what type of information your lender is asking for. Do they want your Social Security Number? Why do they need it if your credit doesn’t matter? They might end up running your credit (which can ding your credit scores) or using the information for identity theft. If you’re not 100% sure who you’re dealing with, keep your Social Security Number to yourself.
If it sounds too good to be true, it usually is. Keep an eye out for overly optimistic promises: nobody can “guarantee” you anything – especially if they don’t you (they need to know a few things about you before deciding whether or not to lend money). Remember also that these loans are always going to be expensive because they are risky loans to make. If you don’t see some hefty costs involved (a high interest rate, or loan processing fees that will be taken out of your loan proceeds), you’re probably not getting the whole picture.
In order to avoid these types of loans in the future, start building credit as soon as possible. Someday you’ll be able to borrow much less expensively, and you’ll have more options available to you (such as longer term loans and higher credit limits) if you build credit. For more information, see How to Build Credit.
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