Getting a loan with bad credit seems like an impossible task, you may be ecstatic when you see for an offer of the personal loan without a credit check with guaranteed approval. But when you go to get a loan without a credit check, you will have to pay for this convenience in the form of high interest and service fees and also provide insufficient credit reports.
These offers are only a scam in many cases. It is important to know how you can differentiate between scammers and legitimate lenders and how to look for other financing options that will not cost you an arm and a leg.
What are personal loans with no credit check?
There are many companies that specialize in giving a loan to borrowers with poor credit reports. However, a personal loan without a credit check is entirely a different thing. These lenders, before giving loans, often consider other financial aspects of the borrowers like regular employment proof and account checks, for a hard credit check. There may be some lenders who will not bother with anything.
Loans that require a credit check of the borrower are auto title loans and payday. These loan lenders will ask for current income proof, bank account information, and a valid phone number of the borrower. These types of loans generally have a short repayment period, ranging from weeks to a month. Usually, payday loans are unsecured and need to be paid on your next payday. The borrower secures auto title loans by the title of the vehicle.
Payday and auto title loan lenders also offer personal loans for a short term ranging for a few months for the repayments of debt. These no credit loan companies often charge a high rate of interest, but you may be given a whole year to repay the debt.
What to be aware of when getting a personal loan without a credit check?
Lenders run credit checks to determine how risky it is to lend you money, and then the interest rate of the loan is set accordingly. If no credit is needed for a loan, the lender is taking a very high risk in that case and therefore expects you to pay a high rate of interest and fees for that. With high fees and rate of interest and repayment period of a short time, there are chances that you get stuck in a debt cycle. You will be forced to take a new loan to pay the older debt. In this scenario, you will end up paying the same fees and interest over and over again and will not be able to get rid of debt ever. If you fail to pay an auto title loan, you may lose your vehicle in case you fail to repay the debt.
Consumer Financial Protection Bureau did a study and found that 80% of the payday loan borrowers have to reborrow within 30 days, and around 40% of payday borrowers online end up defaulting.
How to get a personal loan without credit?
It is not impossible to get a personal loan with poor credit, but the borrowers require some diligence and research to find the best loan he/she possibly could. Below are some steps that you can follow to get a personal loan with no guarantor or credit.
- Always check the credit score. Learn to understand how credit stands. You can request for a free credit report from annual credit Report.com. You can get one credit report for free every year from every credit reporting agency.
- Always make sure if you will be able to repay the loan. You should have a steady income source and calculate your budget if it can support the additional expense of a monthly loan payment.
- Compare different personal loans with bad credit. If you have a relationship with a credit union or bank and have an account with good standing, they may offer you a personal loan. You can also search online for personal loan options with no credit. Always read reviews and fine print about the lender.
- Take advantage of Prequalification. Online lenders let you check your qualification for applying for a loan and without having to pull a credit check. This way, you will not impact your credit score and shop for a loan with no credits online.
- Check for secured loan options. You will find lenders that offer secured personal loans that are easily accessible to borrowers with low credit. The borrower has to put an asset as a security to get these loans, like the home or car. These loans also charge low APRs.
Some Alternatives to Personal Loans without Credit Check
Here are some alternative that you can try instead of falling for predatory lenders
There are federal credit unions that lend money to the union members for short term cash requirements. These short term loan amounts usually vary from $200 to $1000, and the repayment period of one to six months and the APR does not exceed beyond 28 %.
To qualify for such a loan, you have to be a member of the credit union offering loan for a month, at least.
- A co-signed loan
If you are unable to find a decent personal loan option, then you might have better luck with a Co-signer with good credit.
But finding a guarantor or Co-signer will not be easy if you have a bad history of loan repayments. If you are unable to repay the loan, the co-signer will be on the hook to pay the debt. This solution is good but might not be a practical one for all.
- Online lenders
There are some online money lenders that specialize in giving loans to people with bad credit and do not charge high-interest rates and fees. Research on different online lenders. Check their pre-qualification for borrowing money and compare different online lenders. Check reviews of previous borrowers to check the authenticity of the lender. Choose the best available option to get the loan.