No credit check loans can appear extremely attractive to those who are worried about their poor credit history. No credit check loans will typically incur higher costs for the borrower than traditional loans, and there may be caps on the amount that they are able to borrow.
What is a No Credit Check Loan?
A no credit check loan differs from traditional loans in that it does not require a hard credit check on the prospective borrower. Instead, the lenders will look at other factors to determine the characteristics such as amount and length of time of the loan.
No credit check loans can thus appeal to those who are wanting to borrow money but have either no or a poor credit score.
Why do Banks and Lenders Perform Typically Perform Credit Checks?
Typically, banks, credit unions and traditional loan lenders will assess a prospective borrower’s credit history as a way of determining their ability to pay back a loan in full and on time. A credit history can help them to decide the conditions of the loan, including the amount, interest rate as well as loan term and length.
For instance, if a prospective borrower has a relatively low credit score, then a bank may decide to offer them a loan at a higher interest rate as this presents a greater risk to them. Those with strong credit scores may be presented by lenders with more favourable loan terms such as lower interest rates.
With no credit check loans, your application is based on alternative factors to credit history. These may include employment history, as well as any existing loans and credit that you are paying back. As such, those who may not even qualify for traditional loans may be able to take out a no credit check loan.
How do No Credit Check Loans Work?
The application process for a no credit check loan tends to be relatively straightforward – with services offered by lenders both online and in-person. Borrowers may even be able to receive the loan on the same day in some instances.
The application form will typically include questions on your current employment, as well as bank details so that your current income can be verified. Recent payment history may also be analysed by the lender too.
What Types of No Credit Check Loans are There?
There are two types of no credit check loans offered by lenders, payday loans and personal installment loans.
- Payday loans
Payday loans are short-term loans designed to cover emergency payments. They are typically approved in under an hour and should be repaid in full as well as interest in the short period, which is usually around two weeks.
They typically have very high interest rates so can be dangerous for those already in growing debt.
- Personal installment loans
Personal installment loans are repaid over a period of regularly monthly payments. If they do not require a credit check then greater interest rates and additional fees may be charged to the prospective borrower.
Should I Take Out a No Credit Check Loan?
Unlike other types of loans, there are no penalties for the early repayment of no credit check loans. Further, if you regularly meet the repayment dates in full, then this can contribute towards positively impacting your credit score for the future.
However, it is important to note that there are risks associated with taking out a no credit check loan. This includes the high costs that can be incurred due to the lenders charging higher interest rates, which may make it more difficult to pay off the repayments regularly and in full.
Furthermore, no credit check loans typically have a limit cap on how much you are able to borrow so may not be applicable for your circumstances.
How Can I Get a No Credit Check Loan?
It is important to note that applying for different loans may leave hard checks on your credit history, so make sure to research your available options before putting in any loan applications.
You should make sure that you have all relevant and correct information to hand, including your age, income, employment history as well as recent payment history. The lender may additionally conduct a soft credit check, where they will be able to access your current and past repayments of loans and other lines of credit.
Who are No Credit Check Loans For?
No credit check loans may best suit those with no or a low credit score, and are wary of not being able to get approved for a traditional loan.