No-Credit-Check Loans – Should You Get a Loan With No Credit?
As long as there have been people in need of money, there have been lenders eager to take advantage of them. This has been the case since time immemorial, and the status quo isn’t likely to change anytime soon.
In the modern era, this practice is known as predatory lending, and it commonly comes in the form of no-credit-check loans among other frowned-upon financial arrangements. But exactly what are no-credit-check loans? Are they really as risky as they’re made out to be, or is there more to the story? If you’re curious to learn more about this type of lending, get ready to discover everything you need to know in this honest overview of no-credit-check loans.
What Is a No-Credit-Check Loan?
There’s no big mystery when it comes to what constitutes a no-credit-check loan: It’s simply a type of financial arrangement in which the lender doesn’t insist on reviewing a borrower’s credit report in order to grant them some money. No-credit-check lenders aren’t all that easy to find online, but they’re quite common in the physical world.
So why would a borrower want to take out a loan from a lender that doesn’t care to review their credit report? Usually, it’s because the borrower doesn’t have a very good credit score, and they often realize they’re unlikely to get approved for a loan by most traditional lending institutions.
No-credit-check loans can seem like a good idea for those who really need money, but they should generally be considered a last-resort option for people who don’t have anywhere else to turn. Here’s a closer look at why no-credit-check loans are so ill-advised.
Why You Shouldn’t Get a Loan with No Credit Check
It’s safe to say that most people who are knowledgeable about personal finances — and personal loans, in particular — would only recommend no-credit-check installment loans in absolute emergencies. But why is this the case? What’s so bad about personal loans with no credit check?
On the surface, a no-credit-check loan can seem like a solid option for individuals with bad credit. After all, if a lender is willing to issue you a loan even if your credit score is in the gutter, that can’t be all bad, right? Well, not so fast. The truth is that this type of lending arrangement can wreak havoc on your personal finances for months — if not years — to come.
That’s because no-credit-check loans are commonly accompanied by exorbitant interest rates that compound far more quickly than a typical loan from a reputable financial institution would. For people who actually take out no-credit-check loans, this means that, before they know it, they could end up having to pay back twice the amount of money they borrowed in the first place — if not more. And it’s this type of detrimental debt cycle that can cause your credit scores to sink from bad to worse.
No Other Option? Where Can You Get a Loan With No Credit
Even though we’ve established the fact that no-credit-check loans are generally unwise, there will doubtlessly be some people who are committed to finding out to how to get a loan with no credit check required. While exploring their options, these individuals are likely to come across other types of predatory lending including payday loans and vehicle title loans. But are these types of arrangements any better for borrowers than typical loans that don’t require a credit check? Or could they possibly be even less favorable with regard to a borrower’s personal finances?
Alternatives to No Credit Check Loans
The most common alternatives to no-credit-check loans are payday loans and car title loans, and, believe it or not, these arrangements are actually even worse for borrowers than basic loans that don’t require credit checks. The reason for this is that these loan types include astronomical interest rates that even dwarf the aforementioned APRs offered with no-credit-check loans. Astonishingly, interest rates with payday loans and car title loans can be twice as high as the APRs attached to no-credit-check loans.
This isn’t to say there aren’t any companies that provide legitimate payday loans online with no credit check, but they’re not necessarily easy to find. Different states have different regulations regarding how no-credit-check lenders can market themselves, and this often affects how such businesses rank in search engines.
Certainly, there are plenty of no-credit-check lenders that operate within the bounds of the law and don’t put your information at risk. However, at the same time, these lenders likely aren’t doing you any favors in the long run, even if they’re not technically doing anything wrong.
Instead of resorting to a no-credit-check loan, or another form of predatory lending, try contacting a credit union instead. These institutions are, on the whole, more lenient when it comes to lending, and they’re not as hung up on credit scores as traditional lenders often are.
There are plenty of lenders in this country that offer no-credit-check loans such as Oportun, LendUp and OppLoans. However we recommend that you stay away from no-credit-check lenders unless you’re truly in a dire situation and have exhausted all of your other options. In fact, the only scenario in which we can support taking out a no-credit-check loan would be if you’re only seeking to borrow a small amount — think hundreds of dollars, not thousands — and if you can commit to full repayment right away. (That’s weeks, not months.) Other than that, you every other avenue available to you.
The Cold, Hard Truth About No-Credit-Check Loans
When it boils down to it, here’s the only thing you need to know about no-credit-check loans: Any organization or institution that’s willing to lend you money without a care about what your credit report says, is almost certainly not looking out for your best interest. (No pun intended.) So if you take away nothing else from this article, just remember to never take out a long-term loan from a lender that doesn’t require a credit check. Otherwise, you could up paying a ridiculous amount of interest for many years to come.
Consider Online Lenders
Some lenders, like OneMain Financial and Avant, consider borrowers with fair to poor credit. That is, credit scores as low as 600 or even lower depending on the applicant.
Other lenders like NetCredit, LendingPoint and Credible are great options, but may have higher interest rates depending on other factors like employment status and income. Also, watch for additional fees. Nonetheless, online lenders are much better options than no-credit-check loans.