Depending on an individual’s credit score, being able to take out a loan can be quite challenging. Even if the money is lent by a creditor, the interest rates, fees and repayment plans can be very unfavorable to the borrower.
As a result of poor credit, more people are looking towards loans that have no credit check involved. These loans can be a solution that can help a borrower get out of a jam, but there are also some dangers and risks involved as well.
Bad Credit and How It Affects A Loan
Technically speaking, there is no such thing as a “bad credit score”. It’s more or less a statement on how much of a risk a creditor would be taking by lending a loan said borrower.
Each lender has a different scale for what they view as a “good” or “bad” credit score. Here is a basic guideline to what each score range generally means in the eyes of a lender:
300-579: Poor and Very High Risk
580-669: Fair and Risky
670-739: Good and Not Much of a Risk
740-799: Very Good and A Slight Risk
800-850: Excellent and Virtually Risk-Free
Again this is not an official chart but it’s a good rough estimate of how lenders feel. Using this chart as a reference, anyone looking for a loan that has a score of 800 or higher would generally get the best loan terms and lowest interest rates while a score of 580 or lower would be burdened with much higher interest rates or may be outright denied. Scores in the middle would obviously vary with the lower ends being higher rates and the higher scores having lower rates.
So, anyone with a poor credit score will either end up with a high interest rate and unfavorable loan or they just will be denied. These potential borrowers would then turn to the no credit check loan in order to get the money they need.
What is A No Credit Check Loan?
A no credit check loan is exactly what it sounds like: a type of loan that does not require a hard inquiry into a borrower’s credit report. A hard credit inquiry is initiated by a lender when a potential borrower applies for new credit. It can lower a credit score but not substantially, and will remain on the report for up to two years.
However, a no credit check loan circumvents this part of the process altogether which means the lender has no knowledge of a borrower’s credit history whatsoever. Although, by requesting a loan without a credit check it’s a pretty safe bet the credit history is rather poor, otherwise the borrower would want to use their credit score to secure a more favorable loan.
But in this case, credit score is not a factor in any way as far as approval for the loan. This can be both a good and bad thing for a borrower. In the sense that it’s much easier to get the loan it’s a very good thing but without credit history being involved it often means higher interest rates due to the creditor having no idea how much risk granting the loan could potentially be for them.
In short, the pros and cons are a fast and simple application process with quick cash usually coming the same day or next, but potentially costly to obtain with fees and interest rates that could add up really quickly.
Potential Risks of No Credit Check Loans
It’s important to be careful when taking out a loan from anywhere, and to thoroughly read the agreement before signing. Any loan can have severe consequences but here are some of the more common issues experienced by those accepting a no credit check loan:
- Predatory Loan Tactics: From a lender’s point of view, anyone applying for a no credit check loan would most likely have poor credit. They would have a poor credit score because they have had issues not paying back a loan or debt in the past. So how would a lender make its money back offering a loan to someone that historically struggles to pay their debts? By using exorbitant interest rates, hidden charges and late fees. Not every lender does this, of course, but anyone taking out a no credit check loan would serve themselves well to read the fine print.
- A Debt Cycle: Oftentimes the lenders that offer no credit check loans give out said loans to people they are sure are unlikely to pay the loan back on time. The interest rates and late fees will cause the borrower to owe even more money than before and therefore increases the chances they miss the payment again. This creates a new wave of interest and late fee penalties. From that point on the borrower is at the mercy of the lender. Once this debt cycle gets started it can become very difficult to get out of without substantial help.
- Asset Forfeiture: Depending on the specifics of the loan this may alter from individual to individual. Some no credit check loans require collateral to complete the loan application. A car title loan is one of the more common no credit check loans. This means that if the loan is not repaid according to the terms of the loan then the automobile itself can be seized as payment.
The Top No Credit Check Loans Available Online
Now that we’ve covered what no credit check loans are and the potential dangers of taking one out, we can look into some online options. Obviously these loans would vary from individual to individual based upon several additional factors other than credit score.
However, there are some lenders rated higher by customers and experts, which is what we’ll go over below:
MoneyMutual: This is the highest-rated lending network online. They offer a cash advance from $250-$2,500 with the caveat that it’s repaid by the borrowers next payday. The funds are available in as few as 24 hours which makes it one of the faster lenders, and the online form takes less than five minutes to fill out and apply. The interest rates and loan terms will vary from borrower to borrower but over 2,000,000 people have used their services, making it arguably one of the best options available to anyone needing a no credit check loan. These loans are unfortunately not available to those living in New York or Connecticut.
CashAdvance: Not a top rated lender but one of the better options, this service has been around since 1997 and these loans are short-term in nature and range from $100-$1,000. Typically the loan decision is made within a few minutes and the funding is available the next business day. However, this loan does come with some requirements before the application is accepted. The borrower must have an income of $1,000 or more a month and must have had a job for at least the past 90 days. The loan terms may vary but the interest rates can be rather high ranging from 200% to a staggering 2,290%. These interest rates can be quite steep but anyone negotiating a no credit check loan unfortunately doesn’t have much leverage.
OppLoans: This option is more or less the last resort for an online no credit check loan. While they offer lower rates and longer repayment terms than most other payday lenders, they are still quite an expensive form of credit. The APR (annual percentage rate) on a loan can easily reach into triple digits which is worrying because the average rate is about 14%. These loans also come with a lot more requirements. The minimum gross monthly income for a borrower must be $1,500 or more, they must be employed and have a bank account that’s at least 40 days old, and they must receive their paychecks through direct deposit.
The Takeaway: No credit check loans can be a feasible loan option for those with poor credit, but be cautious of exorbitant fees and interest that will likely be part of the loan terms.
The takeaway from this should be that anyone looking for a loan would be wise to do so with good, great, or excellent credit. However, if this is not an option then there are alternatives available. One such alternative is the no credit check loan. Despite having some dangers and risks involved, there are good options online available to anyone searching for them.