What you need to know about loans without credit check
This content is for informational purposes only and is not intended to provide financial advice.
Whether you’re surprised with a good grade in school or receive a not-so-nice medical diagnosis that requires expensive care, life is constantly full of surprises. However, not all surprises are pleasant.
You never know if an unexpected expense is lurking around the corner. It is therefore always best to know what loan options are available to you so that you can get out of a sticky situation if necessary.
That being said, having a bad credit score or no credit score at all can make finding the loan you need a very stressful and time-consuming process. You also need to consider whether this is the most ideal solution for your financial situation.
Here’s everything you need to know about loans without a credit check.
What is a no credit check loan?
A loan without a credit check is a loan that is granted without the lender having to carry out a complete examination of your credit history. These are usually short-term loans with terms ranging from one to four weeks, quite the opposite of a traditional bank loan.
With a loan without a credit check, you must also be able to pay the repayments before it is granted. Credit checks are also required by the Financial Conduct Authority (FCA), so there are not many reputable loan companies that only offer this type of product.
These products can take the form of installment loans, personal loans or other loans â and are extremely useful if you cannot obtain a traditional loan from the bank.
However, they come with risks, so you need to understand exactly how they work and what other options are available to you before proceeding with getting a no credit check loan.
You can find more information by looking at online loans no credit check by CreditNinja.
how they work
With these loans, a lender will consider a variety of data to assess whether you are creditworthy. This includes all non-credit related information such as your employment, income, and general bank account status, as well as your credit score.
To get your credit score, lenders will usually perform a soft credit check on your file. But don’t worry, it has no impact on your score.
What is a credit check?
It is a review of financial information held by a credit reference agency. This gives potential lenders an idea of ââhow you’ve previously handled credit and also indicates how likely you are to repay the loan within a set time frame.
It also shows the level of risk they would have to take if they chose to lend you the money you requested. There are two types of credit checks:
- Firm credit checks are when a prospective lender reviews everything in your file. This will look at almost any account you have that you make regular payments on like your phone bill, mortgage, or credit card. Hard checks can stay on file for about a year, but some can stay visible longer.
- Flexible credit checks are small inquiries into your credit report and will only look at specific information. This is done as an alternative to a credit check and is not visible to other companies – so it will have no impact on your score.
Are there any specific requirements for this loan?
You will still have to meet specific criteria for loans without a credit check, but the rules will generally be quite strict:
- Have a valid savings or checking account. It depends on the lender.
- you must be at least 18 years old.
- You must have a job or other verifiable source of income.
- Some lenders require a credit score as low as 620 while others have no specific margins.
Is it legal?
Lenders must perform some form of credit check before making a final decision on any credit application. All unsecured loans are regulated by the FCA which states that all applicants must be subject to credit checks.
As long as you don’t enter into a credit agreement with a company or lender not regulated by the FCA, you should have no legal problems.
Disadvantages of No Credit Check Loans
As great as they may seem, these loans have their own drawbacks:
With these short-term loans, you may have to pay a one-time origination fee to take out the loan and then cover any late repayment fees. This could significantly increase the total loan amount!
These types of loans can come with a higher annual percentage rate (APR) ranging from 6% to 199%, or even more! This makes them significant in terms of interest charges.
Shorter loan term
You have much less time to repay these loans, which could put you in unwanted financial trouble. Defaulting on one of these loans could leave you in even worse shape.
If you want to get a more traditional loan, there are several options you can consider. Two of the most common include:
These are similar to no credit check loans in that they are also expensive short-term loans. Payday loans are granted based on your income â and a lender will assume that you plan to keep your job long enough to repay the loan in full.
This requires you to pledge collateral with the relevant monetary value equal to or greater than the total loan amount. The lender will provide you with money and will require your permission to take said collateral if you do not repay the loan within the agreed time frame.
This concludes the information you need to know about loans without a credit check.
Having bad credit can significantly reduce the number of loans you can take out. Lenders are looking for reliable people they can trust to meet their repayment obligations within a set time frame, so the process can often be quite intense.