How do banks, traditional lenders, and other financial institutions assess a person’s risk level as a borrower?
If you say, “through a credit check,” you’re right. By going through your financial history, a lender will know your existing and past credit, the types of loans you’ve applied for, your payment habits, and so on. Now, if your loan application gets approved, it means the lender reasonably trusts that you have the means to make your payments on time.
But what if you have no credit or your credit score’s not too good? Are no credit check loans a good idea? Let’s discuss this loan option so you can decide if it’s something you should try.
First Things First: What Are No Credit Check Loans?
The term “no credit check loans” is a bit of a misnomer because lenders who offer them will still check your financials, plus other necessary information. These include your employment status, income level, etc.
However, they don’t perform hard credit checks the way banks and traditional financial institutions do. They also don’t make you fill out tons of paperwork and make you wait for days or even weeks to get approved.
By doing this soft credit check, you don’t have to worry about hurting your FICO credit score. Here’s more information on this, including how simple and straightforward the application process is and also the requirements for getting a no credit check loan if you have bad credit.
Easy to Apply For, but What’s the Catch?
Compared to a typical bank loan, your chances of getting approved when you apply for a no credit check loan is higher, but does that mean you should go for it?
Before you check out, let’s say, no credit check car dealers with ties to online lenders, make sure to check their repayment terms and interest rates. Yes, you’re getting access to easy money, but if you can’t repay your loan, you could fall into a debt trap for years.
Don’t forget that some of these loans have interest rates in the triple digits (almost 400% in some cases). It’s best to consider your other options first (e.g. borrowing from loved ones, credit union loans, bad credit personal loans, and so on), before going the no-credit-check-loan route.
Shop Around If You’re Set on Getting a No Credit Check Loan
If after a free credit check and looking into your other options, you still want to get a no credit check loan, spend some time and effort looking for a reputable lender.
Steer clear of online lending sites that don’t have working phone numbers or mailing addresses. You should also avoid those that offer loan packages that seem “too good to be true.” Even when you’re desperate for cash, you don’t want to rush the process of finding a trusty online lender.
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Need More Personal Finance Tips and Advice?
Now that you know more about no credit check loans, don’t stop here. Try to learn about your other options including working hard to build or repair your credit. This way, you can apply for any loan without worrying about high-interest rates.
For more tips and advice on managing your finances, feel free to check out our other posts.