Loans With No Credit Check: A Guide

Unexpected expenses are a fact of life. If you’re living paycheck to paycheck, the need to borrow even a few hundred dollars quickly and easily may rule out the more protracted timeline of traditional lending and lead you to consider no-credit-check loans, such as payday loans, car title loans and cash advances.

While these loans offer the benefit of quick cash, loans with no credit check usually come with hefty fees and high interest rates that can pose a long-term risk to your finances. It’s important to understand the good, the bad and the ugly truth behind no-credit-check loans before you take one on.

Key Takeaways:

No-Credit-Check Loans, Explained

No-credit-check loans are personal loans from a lender that won’t check your credit. This can help you get the loan even with a lower credit score and protect your score from taking a hit due to the credit check. If you have bad credit or no credit history or merely want to avoid the risk of lowering your credit score, personal loans without credit checks might be a viable choice.

However, no-credit-check loans come with significant potential downsides. For instance, you typically can borrow only small amounts. They also usually charge interest rates and fees that are high enough that if you fail to pay them off very quickly – often within weeks – interest will accrue at annual percentage rates of up to 300% or 400%.

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Types Of No-Credit-Check Loans

There are several options when it comes to no-credit-check loans:

Payday Loans

The way payday loans work varies depending on state law, but, in general, these are short-term loans for a small amount, such as $500 or less. These loans are given against your paycheck and are usually due on your next payday, within two to four weeks. You can get a payday loan at storefront locations or from online lenders, and they typically come with very high fees or interest rates.

Many states cap the fees on these loans to between $15 and $30 per $100 borrowed. That may sound reasonable, but according to the Consumer Financial Protection Bureau, a typical two-week payday loan with a $15 per $100 fee equates to an APR of almost 400%.

Car Title Loans

Car title loans use your vehicle as collateral. These short-term loans also come with high interest rates or fees, but you usually can borrow more than you can with a payday loan.

A title loan works like this: You give your vehicle’s title to the lender, which will approve a loan based on its value. “Car title loans can offer larger amounts, sometimes up to 50% of the car’s value, which could range from a few hundred to several thousand dollars,” says Jon Morgan, CEO and Editor-In-Chief of the consulting firm Venture Smarter, based in San Francisco.

There are important things to know about title loans. First, the term is typically short, such as 30 days. Second, the cost is high. “Car title loans can have interest rates around 25% per month, which can easily add up to an APR of 300% or more,” Morgan says. That means that if you borrow $1,000, after only 30 days, you will owe the lender $1,250. If you can’t pay the loan off, the lender could roll over the loan, which means more expensive interest. The lender also has the right to repossess your vehicle, Morgan says.

Installment Loans

An installment loan is a personal loan you pay back in regularly scheduled installments. These loans can be for a few hundred to several thousand dollars and vary in interest rates and fees. These loans usually require a credit check, meaning credit bureaus will see the inquiry.

If you find a no-credit-check installment loan, it typically comes with other requirements, such as proof of income in the form of pay stubs or bank account statements and a valid Social Security number. You also may be able to get an installment loan with poor credit, since lenders typically consider factors other than your credit score and credit history.

Cash Advances

A cash advance is a short-term cash loan from your credit card issuers. While you usually can charge purchases or services to your credit card, you also can withdraw cash. The amount you borrow is added to your card balance and will accrue interest until it’s repaid. The APR on cash advances is usually higher than that for purchases, and you may also have to pay a cash advance fee. The process is quick because you’re getting the cash from a credit card you’ve already been approved for. You can usually access a cash advance through an ATM, at the bank issuing your credit card, through an online app or by using convenience checks provided by your card issuer.

Buy Now, Pay Later Loans

Buy now, pay later loans are installment loans with a few differences. Retailers usually offer these loans to allow you to pay for a more expensive item in monthly installments. There is rarely a credit check, and the retailers often do not charge a fee or interest, so they offer an attractive alternative to breaking out your credit card. Sounds good, right?

Maybe. These arrangements come with risks. For instance, if you are late or miss a payment, there is often a fee. Also, these are typically offered by third-party companies, so a breach of your personal or financial information is a risk. Finally, since there is often little or no money needed at purchase time, making a financially sound decision based on affordability can be challenging.

Pros And Cons Of No-Credit-Check Loans

Before applying for loans without credit checks, you should know their benefits and drawbacks.

How To Get A Personal Loan With No Credit Check

If you decide to pursue a no-credit-check loan, here are some steps to take.

Figure Out How Much You Need

Take time to determine precisely how much you need to borrow, and stick to it. Borrowing more than you need or can pay back can cost you a lot in interest.

Check Your Credit Score

Although you are planning to apply for a no-credit-check loan, you should still check your credit score. This is because, even if your credit score isn’t in the good or excellent range, you might be able to qualify for a loan with a lower interest rate and better terms.

Research Lenders And Compare Loans

Competition is your friend, so shop around for the lowest fees, lowest interest rates and best terms. It could save you a lot of money.

Apply For A Loan

When you know how much you need to borrow and have chosen a lender, it’s time to apply. Typically, this is a streamlined process because there is no credit check, but you will need some paperwork. You’ll typically need a bank account, proof of income and ID, and you must be at least 18 years old. If you are applying for a title loan, you also will need to own your vehicle and provide a valid title, registration and extra keys.

Repay The Loan

With most short-term no-credit-check loans, you will have one lump sum due on an agreed-upon date. This will include the amount you borrowed, plus the interest or fee. For instance, if you borrowed $500 with a fee of $15 per $100, you will have to pay the lender $575.

Where To Get No-Credit-Check Loans

There are plenty of options for finding no-credit-check loans from storefront and online lenders. In recent years, apps and online lenders have provided some less expensive options.

Alternatives To No-Credit-Check Loans

If you have poor or no credit and need a loan, alternatives to no-credit-check loans might be a better option.

“If (you’re) unable to keep up with payments on no-credit-check loans, borrowers can face skyrocketing debt, damaged credit scores and even the loss of their vehicle, in the case of car title loans,” says Jonathan Feniak, an attorney in San Juan, Puerto Rico, and current general counsel at LLC Attorney. “Considering alternatives like payday alternative loans, peer-to-peer loans, and credit card cash advances may provide more flexibility and lower interest rates.”

Payday Alternative Loan

If you are a credit union member, ask if you qualify for a payday alternative loan. These typically come with lower interest rates than a payday loan from an independent lender. For instance, the APR on these is capped at 28%. The credit union also may give you up to 12 months to repay the loan.

Get A Co-Signer

If you know someone with good credit who will co-sign a personal loan for you, you could get a lower interest rate and better terms, saving you money. However, there are risks, especially for the co-signer. Essentially, they promise to make the loan payments if you can’t. Both you and the co-signer should be confident that you can repay the loan on time.

Peer-To-Peer Loan

Peer-to-peer loans work by allowing you to borrow money straight from an investor, avoiding a bank, credit union or other traditional lender. This can be a family member, an investor or someone found through a P2P website. You’ll likely have to submit your credit score. There also are fees and interest rates.

401(k) Loan

If you have been participating in a retirement savings plan through your work, you may be able to get a 401(k) loan. You usually will have up to five years to pay it back. Not all plans offer this, and if you lose your job, you might have to repay the loan quickly.

FAQ

Here are answers to common questions about no-credit-check loans:

The Bottom Line

No-credit-check loans can be a convenient way to access money for an emergency, but they should be used as a last resort. These loans typically have extremely high interest rates and fees, making them expensive and risky. Because of their high cost and the severe consequences of defaulting, you should fully explore your alternatives before signing on the dotted line.

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