Lenders evaluate your credit status before they decide to approve your loan application. Unfortunately, for those who have bad or no credit, they tend to get denied.
Now, you might wonder if there are ways to get a loan without any credit check. Well, it is possible, but you need to take the necessary precautions.
No-Credit-Check Loans Overview
No-credit-check loans are good ideas if you need to borrow money asap. But lenders who offer no-credit-check loans still have to evaluate your financial capacity to determine your capability to pay your debt. It is not just merely handing you money.
An example of loans not requiring any credit check would be payday loans and car title loans. Payday loans are unsecured loans that you usually need to repay on your next payday. On the other hand, car title loans are secured by a vehicle title. Instead of checking your credit, they require other aspects of your finances, such as your bank account information, employment status, and income. These loan types usually have shorter payment periods that range from several weeks to months and have high-interest rates.
Lenders usually encounter people who don’t have an excellent financial background in no-credit-check loans. The question is, how do they make sure they get paid?
Well, here are different ways lenders ensure they are at an advantage:
- High fees and high-interest rates: Lenders offer high fees and high-interest rates in return to not having your credit checked.
- Unexpected withdrawals: Some lenders set up terms to force you to make proper payments. They do this by requiring you to give them access to your bank accounts, auto-debit funds, or for you to write post-dated checks. If you get into that position, you won’t have any choice but to deal with the payments.
- Consequences: If you fail to make proper payments, you will face the lender’s consequences. For example, lenders will require you to put up the car as collateral for car title loans. Thus, if you can’t repay the debt, the lenders will repossess the car.
Alternatives to Loans with No-Credit-Check
You might think no-credit-check loans are the easiest in getting to borrow money. However, it carries many risks that you might not be able to manage. It is wise to consider these alternatives first before you decide to take a no-credit-check loan:
- Cosigned Loan
If you get denied for a loan, you might improve your chances of having a cosigner who has a strong credit status. A cosigner will be held liable for your loan repayments if you fail to pay what you owe. This will give a blanket of security and assurance to the lenders. However, finding a cosigner who would pledge responsibility can be challenging for some.
- Online Lenders
There are several online lenders on the web. Some online lenders even offer loans to people with no credit or bad credit with not so high fees and interest. You can search for them online and compare offers that best suits your current situation.
- Payday Alternative Loans
Credit unions usually offer this type of loan to its members who need small cash. The amount you are able to borrow may range from $200-$1,000 with a repayment term of 1-6 months. But it is essential to note that in order to qualify, you need to be a member of the credit union for at least a month.
- Improve Your Credit
To get better deals in fees and interest rates, you might want to improve your credit. Good credit will open doors to better loan opportunities. However, improving your credit may take time, but it will be worth it.
Beware of Scams
You might encounter scams in no-credit-check loans. That is why you need to take extra precautions in getting this type of loan. If you have bad credit and in dire need of money, scammers may take advantage of your desperation and present you with illegitimate offers. Here are some signs that it might be a scam:
- Over the phone loan offers
- You can’t find the lender’s address
- The lender is not registered in your state to operate
- You are asked to send money to a third party
Loans with no-credit-check may be tempting for people who have bad credit. However, it is vital to take note that they are quite expensive. Thus, it is wise to consider other alternatives to save yourself from being trapped in a debt cycle.