Not having enough money and struggling with a low credit score can be one of the most frustrating situations imaginable. Such a combo of problems – a low credit score and not having enough to cater for your bills – is very hard to find solutions without seeking help in the form of a no credit check loan. But even that help may not be so forthcoming.
Traditionally, banks and other lending houses typically require that you have a pretty decent credit score before they can consider approving you a loan. Therefore, if you have a low credit score or no credit at all, your chance of securing a typical loan from such traditional financial institutions can be very small. This may very well force you to consider loans that don’t require a credit check.
Your loan options may be limited with bad credit, but it doesn’t mean you have no options. Some lenders are willing to give you a loan even without a good credit score. You only have to know where to look.
What is a Personal Loan?
In a nutshell, a personal loan is like a fixed amount loan that is loaned out as a single sum payment.
Personal loans are usually referred to as unsecured loans. However, unlike secured loans that you usually take to buy a car or home, personal loans have no restrictions on how you can spend the money. This added flexibility is in many ways since individuals can obtain such loans without collateral attached.
Top Reasons For Personal Loans
Ideally, nobody wants to be in a situation where they feel a loan is the only way out. However, life happens, and sometimes, a personal loan is the best way to finance a large project or pay the bills you can’t afford upfront.
Here are some of the significant reasons to get a personal loan:
1. Debt Consolidation
Debt consolidation is one of the most typical reasons for taking out a personal loan. You consolidate your debt when you take a loan and use the funds to pay off other previous loans or credit cards, thus, combining all outstanding debt balances into a single monthly payment. Having all your debt in one place and on a single term makes it easier to work out a time frame for paying back what you owe.
Indeed, this strategy appeals more to those who have multiple debt sources with high-interest rates. This is because they can take advantage of the usually low interest rates for personal loans to pay off several high interests loans quickly.
2. Home Remodeling
Homeowners who are looking to upgrade or renovate their homes can turn to personal loans. For homeowners who don’t want to take an equity line of credits don’t need to use their homes as collateral for an equity loan, a personal loan can suffice as the perfect alternative. The appeal for personal loans is that they are less risky since there’s no collateral and can finance small to medium home renovation works.
3. Home Appliance Purchase
Whether you suddenly realize you need an air conditioner or need to replace the washing machine, personal loans can come in handy in such scenarios.
With personal loans, you can purchase major household equipment even when you are short of funds. For example, say you need a high-performance computer system for work or leisure; it can take you months to save up for such a gadget. Why wait so long to have something you clearly can afford where time is not a factor?
A personal loan can help you purchase home appliances when you need them and not when you can finance the purchase upfront.
4. Vacation Expenses
Most people may advise against taking a loan for something like a vacation, but if there’s one type of loan which can help you live your dream vacation, it’s a personal loan.
If you are planning a dream honeymoon or a luxury cruise, personal loans can help you finance those and make your dream a reality. As long as you’re comfortable paying off the loan in a couple of years, a personal loan can help bring your dream vacation much closer to when you want it to be.
5. Emergency Expenses
An emergency that we don’t plan for can often cost a lot of money to handle. For example, sudden emergencies like paying for a family member’s funeral can run into thousands of dollars, and most families don’t have that kind of money in the bank.
Also, most emergency expenses come in the form of medical bills. And as you know, there are so many reasons why we can find ourselves in the doctor’s treatment room: dental work, fertility treatment, cosmetic surgery, and sudden illnesses. All these medical procedures can gulp a lot of money, and it can worsen if the doctor demands full payment before beginning the treatment.
The typically quick approval and disbursement of a personal loan make it an ideal way to cover emergency expenses. In addition, borrowers can use personal loans to finance other related expenses like medical travel and medications.
Because traditional loans and credit cards cater to those with a reasonably good credit score, people who have one or more reasons to take out a personal loan seek alternatives. Particularly no-credit-check options to give their finances a boost.
Why Do Banks and Other Lenders Perform Credit Check?
Financial institutions like banks and lending houses that give out loans usually check your financial history to determine your creditworthiness and ability to repay any potential loans given to you. The state of your financial health directly affects the terms of your loan in most cases. People with low to bad credit scores usually get loans with relatively higher interest rates, as lenders consider them as higher-risk clients.
Some people have very low to nothing credit ratings which means they don’t qualify for a loan. Anytime they request a loan and get a NO, this is reported in their credit reports. Further denting their chances of securing a loan.
In such cases, the only other route possible is for lenders to turn a blind eye to their credit history and look for alternative ways of determining creditworthiness. This is where no-credit-check loans come in.
Does That Mean No Checks Whatsoever?
Not quite. Don’t let the name no-credit-check trick you. No lender (genuine, at least) is just going to give out money without knowing a thing or two about you.
Instead of performing a “hard credit check” or a traditional credit check where lenders scrutinize your credit history, they will use alternative ways of evaluating whether you are worthy of a loan. Crucially though, this “soft” credit check is one that typically doesn’t concern or affects your credit score.
What Lenders Look For When You Apply For a No Credit Check Loan
When you apply for a no credit check loan, lenders don’t look at your traditional credit scores, such as your FICO score that Equifax, Experian, or TransUnion generate.
Instead, lenders will request some personal information to show that you are capable of paying back any loan you are given. The information you’d be required to present vary from lender to lender, but here are some of the personal information we typically need from those seeking out a no-credit-check loan:
- Employment status or history
- Proof of other incomes
- Bank statement
- Records of borrowing history
- Other credit data
Are No Credit Check Loans Safe?
No credit check loans are generally seen as a last recourse for borrowers in financial distress. However, because a lender doesn’t run a traditional credit score check can be a potential source of concern. Surely, no genuine lender will be willing and happy to give out loans to very high-risk people. That will be a sure way of running out of business for the lender.
But essentially, what no credit check entails is that lenders ignore your credit rating and look for other means of evaluating your ability to pay back a loan. You should be wary if you come across a lender who is entirely not interested in your borrowing history. There are many reasons to run some form of creditworthiness, and you should be wary if a lender is uninterested in doing so.
No Credit Check Loan Options
Time to see no credit check loan options that don’t require a traditional hard credit check with many credit issuers. As you’ll see, there are quite a few options that range from online loans, fast cash loans, and paydays loans.
- Credit Unions Loans
Credit unions may offer to give their members secure and unsecured loans without a regular credit check. Before approving such a loan, they might consider a few things, such as a member’s standing in question. Some unions would consider the financial history of the applicants beyond a credit score, such as employment history, previous borrowing history like student loans, and pay-stubs.
- Payday Loans
Payday loans refer to short to medium-term loans that don’t require a traditional credit check. However, payday loans are usually expensive for borrowers with bad credit ratings because the annual percentage rates are typically high. This is calculated by computing the interest rates, fees, and the time the borrower takes to pay back the loan.
Payday loans essentially mean the borrower has to pay back the loan in a few weeks, usually by their next payday.
- Online Credit Loans
Online lenders give personal installment loans to borrowers who have bad credit or are without credit. While some lenders will still run a credit check, most will use other financial information to determine whether to approve a loan or not.
Personal installment loans allow the borrower to repay the loan by paying a predetermined amount monthly. This monthly sum is determined by the size of the loan and other factors usually covered in the APR’s.
- Co-signed Loans
When an applicant has a very bad credit score or none at all, lenders may become a little wary of signing off for a loan to such persons. However, suppose the borrower can find a cosigner who has a much better credit score. In that case, that person will apply for the loan with the borrower, and the cosigner would be held responsible should the borrower default payment.
Lenders are much more confident giving loans to people with bad credit if they can present a cosigner.
The Bottom Line
There are many reasons why you may need to take a personal loan – and even beyond the options listed. But with bad credit or no credit, you have a limited option to benefit from. However, one potential option is a no credit check loan for which lenders consider other factors like your employment history to approve you a loan.
But no matter the circumstances surrounding your loan, it is still a loan you have to pay back eventually. You can take advantage of no credit check personal loans to consolidate your debt or have the perfect vacation but always utilize such financial resources wisely.