Loans With No Credit Check

You need money, whether because your car broke down, the furnace is on the fritz, or you have a dental or medical emergency. Unfortunately, your bank account is a little low, and you just can’t swing the extra cash right now. What do you do?

You might consider hocking your grandmother’s prized jewelry to pay the dentist, but you don’t want to part with her inheritance. You want to apply for a loan, but for whatever reason, you do not have a stellar credit history. Life happened and you haven’t built a credit history or if you did you fell behind on credit card payments. Maybe you dug yourself into a financial hole that you’re eager to get out of.

You know when you apply for a loan, you’re almost certain the lender will turn you down after they run that dreaded credit check. All hope is not lost though. There are lenders that offer no credit check loans, but beware that there are risks in taking out such a loan.

Let’s dive into what no credit check loans are, why you must be cautious before applying for one, and other borrowing options.

What Are No Credit Check Loans?

Typically, lenders pull a credit report to determine your worthiness and reliability for paying back their loan. This report paints a picture of how well you handle money. It might include derogatory information such as a low credit score, records of late payments on previous credit cards or loans, foreclosures, bankruptcies, and other accounts that went to collection. The lender may use this negative information against you when you apply for a new loan.

However, a few lenders offer no credit check loans, which means they do not require a credit report when deciding whether or not to approve your application. Some lenders still peek at your credit report with what’s called a soft credit check, but they do not complete a hard credit check or use your FICO score to determine if you’re eligible. As a result, there’s no ding on your credit score.

Factors to Consider

Instead, these lenders use other factors such as your employment status, income, debt-to-income ratio, bank account history, and, if you are applying for a secured loan, collateral.

Income

Lenders need proof that you have a steady income to repay your loan. The minimum monthly income requirement is approximately $750, depending on the lender.

Debt

Your debt-to-income ratio (DTI) number is important because the lender will use this to determine how much money you have in order to pay off your debt on a monthly basis. Your DTI is all your monthly debt payments divided by your gross monthly income (before taxes). For example, let’s say all of your monthly debt equals $2,500 and your gross monthly income is $8,000, your DTI ratio is about 31 percent. (2,500/7,000=0.3125). How high your DTI can be will depend on the lender.

A lender is taking a big risk by loaning you money without a credit check. As a result, no-credit-check loans come with very high interest rates and fees compared to traditional personal loans. How high? One such loan at lenders has an interest rate of 160% compared to a traditional personal loan with an 8% interest rate for a consumer with a good credit score.

How No Credit Check Loans Differ from Traditional Personal Loans

You already know that lenders of traditional loans will require a credit check and a good credit score to be approved. They also offer a much lower interest rate than no-credit-check loans. There are other differences between these loans.

First, most no-credit-check lenders offer smaller loans and shorter repayment terms. For example, OppLoans loans start at $500, max out at $4000 and come with a repayment term of 9 to 18 months. While a shorter repayment term may help you pay off the loan faster and accrue less interest, it might be harder if you are already struggling to pay your debts.

In comparison, traditional lenders such as Discover offer personal loans from $2,500 – $40,000 and repayment terms of 36 to 84 months. LightStream offers loans of up to $100,000 with 24 to 84-month repayment options.

Quicker Approval Times

Of course, approval times vary depending on the lender, but typically a no-credit-check loan has a faster approval process than traditional loans. This can be anywhere from a day to 7 days while some traditional lenders might take longer.

Fees

Before signing on the bottom line of your application, it’s best to crunch all of the numbers to see if this is a loan you can afford. You should include the interest rate and origination fees. An origination fee for processing your loan application can be 0.5% to 1% of the loan amount. Also, depending on the lender, there may be other fees, such as late payment fees. While many lenders do not penalize you if you prepay your loan, others do, so read all of your documentation closely. The last thing you want is to try and pay off your loan early to find out you owe even more money.

Lenders provides an example of your monthly payment if you were to borrow $4000 for 18 months at 160% interest. Your monthly payment would be $595.14. Over the 18 months, you would pay a total of $10,712.52. Is this something you can afford? Be careful. Needing money can make you feel desperate, but you do not want to spiral your financial situation even further.

What do you need to apply for a no-credit-check loan?

You might not need to provide a credit report or have a high credit score to apply for this loan, but you must still meet a few requirements and supply some documentation.

Age

Almost all lenders require that the applicants be 18 years of age or older.

Identification

You will need to provide identification, a state-issued ID, such as a driver’s license. Other acceptable forms of identification include a U.S. passport, birth certificate, and citizenship certificate.

Social security number

You will be required to provide your social security number.

Location

Lenders require their applicants to reside in certain states where they operate. For example, if you live in New York, but the lender only operates in New Jersey, you cannot apply. However, they may work with lending partners in other states.

Income

Lenders need proof that you have an income to pay your loan back. Many request documentation such as paystubs, W2s, tax returns or other wage statements with your application. Many also require that your income be directly deposited into your account. Your source of income can be from employment or from benefits you receive, such as disability and Social Security. You can, but are not required to, include income from child support, alimony, or any other maintenance income.

Employment

You will need to supply proof of employment. This can be the most recent paystub or a verification letter from your employer on company letterhead.

Bank account

Lenders will require proof of an active savings or checking account when you apply. Once your application is approved, this will be linked to your loan so payments can be automatically withdrawn.

What are alternatives to no-credit-check loans?

Before you consider apply for a high-interest no-credit-check loan, consider other options.

Family and Friends: Nobody likes asking to borrow money from family and friends, but it will be much more cost-effective to ask your rich Uncle George or your Grandma to borrow a few thousand dollars. Set up a repayment schedule and get everything in writing, the same way you would if you took out a loan.
Credit Card Advance: If you have available credit on a credit card, consider taking out a cash advance which will have a much lower interest rate than a no-credit-check loan. Before you take out the advance, check the small print on your card. You may be charged an advance fee and pay interest if you do not pay it back in full on your next due date. The interest for an advance might be higher than a regular credit card purchase.

Paycheck Advance

Can you arrange a payday advance at your job? If so, once again, read the fine print on the payment arrangement before signing. Will there be fees or interest for paying it back? How long do you have to complete your repayment?

Payday Loan

If you only need a small amount of money to tide you over to your next paycheck and you are absolutely sure you can pay it back, consider a payday loan if you do not have any other options.

Payday loans are very similar to no-credit-check loans, in that most applicants have low credit scores and are typically approved if they meet minimum requirements. You have a short period of time to pay the loan back before high interest rates kick in. Keep in mind that as of January 2023, payday loans are illegal in 19 states (Arizona, Arkansas, Colorado, Connecticut, Georgia, Maryland, Massachusetts, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, South Dakota, Vermont, West Virginia and the District of Columbia).

How do you apply?

If you have exhausted other, more affordable borrowing options and a no-credit-check loan is your last resort, how do you apply?

Research

There are a few websites listed here, but make sure you do your own research to find the best lenders for you. Once you’ve narrowed them down based on exactly how much money you need, interest rates and repayment terms, it’s time to fill out an application.

How much money do you need?

Be careful here. You might need $1,000, but be tempted to apply for more. Only apply for what you can afford to pay back. Remember you will be paying back interest as well.

For how long?

Do you need a few months or a few years to pay the loan back? Again, it’s important to be realistic. You may want to pay it back quickly but choosing a longer repayment term might be easier on your financial situation. If your finances improve, make sure your lender allows prepayment without penalties so you can pay it off as fast as possible.

The waiting period

Now you wait. Depending on the lender, this waiting period can take a few days or a few weeks. The lender may have additional questions for you or need further documentation.

Receiving the loan

If your application has met the criteria, you will hopefully receive your approval and the money will be credited to your bank account. How long this takes will depend on the lender. It can vary from a few hours to a week depending on the lender and your bank’s processing.

What if your application gets denied?

You don’t want it to happen, but there is a chance that your application could be denied. The lender should let you know why you did not meet the requirements of the loan, but if you have questions, contact their customer service department. It might be something as simple as missing documentation or the fact that the lender does not operate in your area.

No credit check loans should be a last resort when it comes to applying for a loan.