Home > Personal Loans > What Are No Credit Check Loans?

Comments 0 Comments

Most lenders check your credit history when you apply for a loan. If you have a record of making payments on time and aren’t using most of your available credit, you’re more likely to be approved for mortgages and other types of loans. You’ll also qualify for better interest rates than people with a poor credit history.

If you have bad credit or haven’t yet developed a credit history, however, you may be able to qualify for a no credit check loan. Read on to learn more about the advantages and disadvantages of these types of loans.

Benefits of No Credit Check Loans

If you have an emergency, such as a medical problem or car repair that requires quick cash, a no credit check loan might seem like a helpful option. Many of these loans offer the fast approval and immediate funds transfer you need to solve the issue at hand. Generally, no credit check loans are for between $50 and $1,000.

However, it’s important to be aware of the terms of your loan as well as the interest rate. Read all paperwork carefully before agreeing to this type of loan.

Reasons to Avoid No Credit Check Loans

Some no credit check loans carry a super high-interest rate, often above 100%. These type of bad credit loans, often called payday loans, are known for locking the borrower into a cycle of high-interest loans that the borrower can’t repay.

Some states have capped the interest rate for no credit check loans at 36%.

If you choose this route, avoid predatory lenders that charge high rates and encourage you to take a second loan to repay the first. And don’t give a lender direct access to your bank account to withdraw monthly payments.

Even if you’re able to make timely payments on your no credit check loan, these types of loans don’t report to the three credit bureaus. That means that paying as agreed won’t boost your credit score. In contrast, paying as agreed on a traditional bank personal loan will help you improve your credit, because most banks report to at least one if not all three credit bureaus.

The Consumer Financial Protection Bureau reports that even though no credit check loans don’t help your credit score, they can hurt your score if you fail to pay. That’s because the lender can sell the debt to a collection agency, which would, in turn, report your delinquency to the credit bureaus.

Loan Options for Poor Credit

If you don’t have the credit score to qualify for a traditional loan and are reluctant to take a no credit check loan with a high interest rate, you do have options. Some of the best routes to explore include:

  • Credit unions often have more relaxed credit guidelines than traditional banks and lenders. They also typically offer short-term loans of $500 or more with reasonable interest rates that you can actually afford to pay back. Loans from federal credit unions are capped at an 18% maximum interest rate. In some cases, you’ll even be able to customize the payment terms of a loan from a credit union.
  • Collateral loans are available if you own something of value, such as a car. With this type of loan, the lender holds the title to the vehicle until the loan is repaid. However, if you don’t pay as agreed, your car could be repossessed. This option should be limited to situations when you have the projected cash flow to pay the loan back quickly. This type of loan is sometimes called a secured loan.
  • Many online lenders offer personal loans of up to $5,000 to borrowers with credit scores below 600. Although your credit will be checked for this type of loan, most lenders will do a so-called soft pull. That means the inquiry won’t affect your credit score.
  • A friend or family member with a good credit history may be willing to cosign your loan. This means that if you don’t repay the loan as agreed, that person is responsible for the debt. It’s important to have a plan to pay off the loan if a loved one trusts you enough to cosign for you. This will allow you to qualify for a reasonable interest rate and improve your credit over time.
  • If you already have a credit card, taking a cash advance can be costly but is typically less expensive than the cost of a payday loan. You can also consider applying for a new credit card. Although this will require a hard credit check, some cards are available to those with bad credit scores.

Getting Approved for a Loan with Bad Credit

Improving your credit expand your options when it comes to loan approval. You’ll also be able to qualify for lower interest rates and more favorable repayment terms. Here are some steps you can take to improve your credit:

  • Pay your bills on time and in full each month. This will also improve your financial situation by helping you avoid late fees and interest payments.
  • Check your credit report and make sure the information is accurate. You can get a free annual copy of your report from each of the three credit bureaus. You’re also eligible for a copy if you get denied for credit. Dispute any negative items that are incorrect.
  • Keep your total revolving debt at less than 30% of your total available credit card balance. The more of your available credit you use, the higher of a risk you pose to lenders.
  • Keep old credit card and loan accounts open. Part of your credit score is determined by the age of your credit history and your debt utilization ratio. Closing those old accounts can lower raise your ratio and actually hurt your score.
  • Pay up-to-date accounts that are listed as past due on your credit report but aren’t yet listed as “charged off.” The latter term means that you haven’t paid in more than 180 days. Accounts that are charged off can severely damage your credit score. However, you can prevent this from happening by paying the past-due amount.
  • Attempt to settle accounts that have already been charged off or that have been sent to collections. You can contact the lender or the collection agency and request to settle the account for a portion of what you owe. In some cases, the company will agree to remove the charge-off from your credit report.
  • Open a new credit card, which increases the amount of credit you have available and lower your total credit utilization. Remember to be strategic about applying for new accounts though. Too many inquiries at once can drop your credit score. And don’t use the new card much, if at all to keep your credit utilization ratio as low as possible.
  • Be patient. If you continue to make smart, well-informed financial decisions, your credit score will improve over time.

The resources on Credit.com have a lot of information on how you can work on improving your credit. Compare financial products to find the right credit card or personal loan for your needs and monitor your credit with the free score and credit report card on Credit.com so you can work on any issues that might be lowering your score.

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team