Unless they are applying for a line of credit or a loan, most people don’t spend a lot of time thinking about their credit score. But if you are in a position where you need to borrow money, suddenly that score becomes very, very important. Are no credit check loans real, or just a flight of fancy?
So what is a person to do if they need to borrow money and they have no credit, or even worse, bad credit? Unfortunately, your options are fairly limited.
Getting a personal loan, car loan, or mortgage through a bank or credit union is simply not viable with bad credit. Aside from student loans, virtually all lenders require some form of credit check.
Virtually all, but not all.
Why So Important?
The reason a credit score is so important to lenders is that there is no better indicator of whether or not you will repay that loan. There’s no longer such a thing as a “handshake deal” and these money lenders need to protect their investment and be confident they will get their money back.
If you have no credit score, or a very poor one, the lenders must assume you are a bad risk for repayment. The only way to offset this is to provide collateral (more on this later).
Where can you turn when you need money and don’t want a credit check? And what are the best practices, to make sure you get your money without losing your shirt in the process? The truth is these loans are out there, you just need to be careful in how you approach them.
3 Kinds of No Credit Check Loans
1. Student Loans — The vast majority of student loans don’t require any kind of credit check; they are geared towards borrowers with little to no income and nonexistent credit. If you need money for school, you’re in luck. If you need money for any other reason, keep on scrolling.
2. Car Title Loans or Collateral Loans – Without a good credit score to vouch for you, you need to have something of value you can use to back the loan. This way if you default on the loan, the lender doesn’t walk away empty-handed. The most common type of collateral loan is a car title loan.
You get to keep your car, but the lender keeps the title. When you repay the loan, you get your title back! If you don’t pay the loan, one day you will wake up to find a repo man waving goodbye in the rearview mirror.
3. Payday Loans or Cash Advances – These are the most common type of no credit check loans. To offset the risk of default, these lenders charge a higher rate of interest, but they also have the fewest number of hoops to jump through. It is widely debated if they are “predatory,” but the truth is they have some big benefits (speed and availability) to balance out the high APR.
What to Expect/How to Qualify
Just because they don’t require a credit check doesn’t mean you don’t have to provide some verifiable information. Yes they are no credit check loans, but we do live in the Age of Identity Theft.
For a payday loan, usually the application is done entirely online. You will need to provide information to verify your identity (address, phone number, social security number, etc.) as well as provide proof that you have steady income, and an active bank account. Remember, proving you have a bank account is not the same as a credit check – they don’t pull your report or your history, they just confirm you have a bank and deposit funds into it.
For a car title loan, most of the same information is required. However, the biggest piece of the puzzle is providing the details about your vehicle, and being able to give them a valid title.
Like in Boxing, Protect Yourself at All Times
Before taking out any kind of loan, you must put in due diligence and make sure you are getting what you have been promised. This includes doing some research before signing a contract or taking any money, and making a budget for repayment.
Payday loans and car title loans are not legal in all states. What are the laws in YOUR state? Find out.
No credit check loans have a higher APR than bank loans, but they are not intended to be long-term investments. There are horror stories about cash advances with interest rates that go into the hundreds, but if you pay the loan back on time the rate is closer to 20% or 30% Paying a $50 fee for borrowing $200 is reasonable to most, but by making partial payments, a borrower could find themselves paying hundreds of dollars over the life of the loan.
Similarly, delinquent payments on a car title loan can end up with you paying more than the value of the car, and then still seeing the car get repossessed by the lender.
Don’t go in blind. Have a plan and a timetable for paying back that lender!
Don’t assume every lender is completely honest. Make sure there are no extra fees, hidden charges, or balloon payments.
But at the same time Don’t think that just because your credit score stinks that there aren’t respectable lenders willing to loan you money.