Loans without credit check: borrowing options and alternatives

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No matter how urgent your need for cash is, think twice about getting a no credit check loan. Why? Because they are potentially as predatory as payday loans or car title loans and can trap you in a cycle of debt for years.

These loans, also known as no credit check loans installment loans – come with rates over 400% in some cases, well above the rates you’ll find at credit unions or online lenders.

Before you borrow, consider other options and learn how these loans could put your finances at risk.

Nerdy tip: An installment loan can be a more affordable way to borrow money. These loans allow you to borrow the money all at once and then pay it back in fixed monthly installments over a period of months or years, instead of weeks. You won’t need to provide collateral, and loan amounts tend to be higher, while interest rates are generally lower. Lenders usually require a credit check to apply, but you can find installment loans for bad credit.

Loan alternatives without credit check

But a low credit score may not stop you from borrowing from a lender with affordable rates and responsible underwriting practices.

Here are other loan options for borrowers with bad credit (629 or less FICO).

Loans from credit unions

More credit unions offer small personal loans of $500 and up, and they may consider information other than your credit score, such as your membership history, to qualify for a loan. Many also have credit cards or start-up loans to help you establish a credit history. The interest rate charged by federal credit unions is capped at 18%.

Alternative payday loans

Known as PAL, these loans issued by credit unions help small borrowers avoid the debt trap created by traditional payday loans. APRs on these loans are capped at 28%.

Online lenders

Some online lenders consider borrowers with poor credit, even with scores below 600. Loans for bad credit have higher rates, but lenders look at other data, like employment status and outstanding debts, to help you qualify.

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How to spot a loan without a credit check

Unlike lenders who look at your credit report to see how you’ve handled your debts in the past, a no credit check lender offers you money without guaranteeing your ability to repay it.

Loans without credit checks can come from online or storefront lenders that promise a simple application process and fast delivery of funds. Loan amounts range from $100 to several thousand dollars and are usually repaid in equal, fixed installments over months or years, sometimes with add-ons like credit insurance or fees that increase the cost of the loan.

Some of these lenders require access to customers’ bank accounts and automatically withdraw the money on the due date.

Example of a loan without a credit check

If a lender charges a 200% APR on a $2,000 one-year loan, you’ll pay $396 per month. That same loan would have monthly payments of $201 with an APR of 36% — the highest rate an affordable loan could have, according to most consumer advocates.

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Are there safe no credit check loans?

A no credit check lender who reviews some of your financial information is a safer choice than one who lends money no questions asked.

Some online lenders, for example, examine an applicant’s bank account to assess their spending habits, deposits, and withdrawals. An account that shows multiple overdrafts may disqualify a candidate.

Other lenders review reports from other credit reporting agencies that collect information about consumers with low credit ratings. These reports can show things like whether you got a payday loan or a title loan.

These lenders charge high interest rates because it’s riskier to lend without a credit check, but the effort to determine your ability to repay a loan helps you avoid falling into the debt trap.

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