No-Credit-Check Loans and How to Get Them

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Some people have a low credit score because they made a few mistakes in the past; hopefully, they learned from these. Others aren't really to blame at all: a bad credit history can just as well be the result of circumstances beyond their control. Is it really fair that your credit report can prevent you from getting a loan?

In reality, no-credit-check loans do exist, giving individuals with bad credit a way out. They do sometimes come with more strings attached than, for example, personal loans to people with good credit scores. This makes it very important to know how exactly a loan for bad credit works, what types there are, and how to choose between them.

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Key Points About No-Credit-Check Loans

Before we get started, let's take a look at some of the important characteristics of loans that do not require a credit check:

  • Because a full credit check can take as long as several days, these are often the quickest loan option you have.
  • Even though your credit history may not matter, there are usually other requirements like a bank account and proof of income.
  • Because financial companies take a greater risk with loans on bad credit, they typically charge higher interest rates and fees.
  • Alternatively, you may need to put up some form of collateral - something of value that will become the lender's property if you fail to repay the loan.
  • For both payday loans and personal loans, the entire process can be done without setting foot in an office - an online loan provider will do much of the work for you.
  • No-credit-check loan companies don't run a "hard" credit check; loans are approved on the basis of your income and other factors. This means that merely applying for a loan, unlike at banks, doesn't damage your credit report.
  • Assuming that the lender you choose reports your repayments to the top three credit bureaus (many of them do not), taking out a no-credit-check loan can actually improve your credit score.

The Risks of No-Credit-Check Loans

The biggest danger with all loans is that you end up borrowing more than you can afford to repay. This can be very inconvenient, as most lenders will continue to charge you interest and late fees long after the original loan period has expired. Financial companies in this space may do a cursory check of whether you're able to make the payments, including by looking at your credit, but figuring this out is ultimately your responsibility.

The easiest way to do this is to draw up and stick to a budget. Knowing how much money you have coming in and going out each month is the first step towards controlling your finances. It's also helpful to pay your creditors first so that you're not tempted to spend that money on frivolous stuff. Borrowing $500 for two weeks can easily cost you $75 - this isn't a problem if it happens once in a while, but will seriously harm your finances if it becomes a habit.

You will also want to improve your credit score over time. This is a slow process at best, but having better credit will eventually allow you to look at loans that do require a credit check. These charge much more affordable interest rates, meaning that you'll one day be able to consolidate your expensive debt and reach financial independence that much faster.

In Conclusion

Loans without a credit check can be a lifesaver if your credit is poor and you need to bridge the gap between now and the next time you get paid. They are a very expensive form of credit, though, so it's essential to shop around for the best possible interest rate and lowest fees.

Has an emergency ever forced you to take out a loan of this type? If you like, please use the comment section below to tell us how that turned out and what you'll do differently each time.