Yes, there are some no-credit-check loans. But that doesn’t mean you should get them. Here are a few options (and why they might not be the best choice for borrowers):
Payday Loans
Payday loans are a type of unsecured loan where lenders don’t typically check credit. These loans tend to be small, usually a $500 loan amount or less (although some lenders might offer more), but come with strict repayment terms. In most cases, you’ll need to repay your loan, along with any additional interest and fees, by your next payday.
These loans come with higher interest rates, around 400%. To compare, most traditional personal loan lenders max out at an annual percentage rate (APR) of 36%. Many of these traditional lenders initiate hard credit inquiries when checking your credit.
Keep in mind, however, that even though these traditional personal loan lenders require credit checks, having excellent credit isn’t always required to qualify. Many traditional lenders offer loans to borrowers with a bad credit score or a sparse credit history.
Car Title Loans
Car title loans are secured loans that use your car title as collateral to borrow money. While you can usually continue to drive the car while repaying your loan, you don’t get your title back until the loan is paid in full.
The amount you can borrow with a car title loan is usually equal to how much your car is worth, and usually, you need to own your car outright to get a car title loan. Interest rates typically mirror those of payday loans, but defaulting on your car title loan is much worse since it could mean your lender will repossess your car.
Even though no-credit-check loans exist, you can get a personal loan with bad credit, fair credit or even without much credit to your name. Your credit history is one part of a personal loan application, but it isn’t the only one. A poor credit score shouldn’t hold you back from trying to get a loan. Consider the following steps when attempting to secure a personal loan:
- Check your credit score: Start by checking your own credit score and credit history. You can pull your credit report for free from each of the three major credit bureaus at AnnualCreditReport.com. You can do this weekly, and checking your score and reports yourself doesn’t have any negative impact on your credit history. Doing this gives you an idea of what lenders will see when they pull your credit report.
- Clean up any errors: Comb through your reports to see if there are any errors that you can report to the credit bureaus. Getting errors removed from your credit report can boost your score to help you qualify for personal loans down the road.
- Research lenders: There is no minimum standard across personal loan lenders. You should check out eligibility requirements from many different lenders to see which personal loans you qualify for before going through the full application process. If you don’t see a minimum credit score requirement, it could mean that a particular lender doesn’t mandate a minimum and instead evaluates you based on a multitude of factors, including your income, employment, creditworthiness and how much you want to borrow.
- Complete prequalifications: Prequalification lets you see if you’re eligible with a particular lender without completing a full application and triggering a hard credit inquiry. Be honest when you prequalify so you know if you should move on to filling out a full application or trying another lender. Some loan offers might not have prequalification, so looking for those that do can give you insight on how to proceed.
- Compare offers: Assess different lenders based on APRs, fees (origination fees, late fees or prepayment penalties), repayment terms and more. The less you pay in loan rates and fees and the longer repayment terms you have, the less your monthly payments will be. Low monthly payments could be an important factor when it comes to repayment of your loan.
Without good or excellent credit, you might feel compelled to try out different personal loan options. There are some red flags to watch out for, such as the following:
- High APR requirements: Most personal loan lenders don’t charge more than 36% for borrowers with poor credit, which, admittedly, is still high. If you see something much higher than that, skip it and move on to better offers.
- Fast repayment terms: Payday lenders and car title loans require repayment within a few weeks or by your next payday. Not everyone has the funds to repay loans that fast, and it could put you in a cycle of borrowing high-interest no-credit-check loans. But that means you’ll end up owing even more in the long run after interest and fees are tacked on. Find loans that offer repayment terms that are at least a few months or upward of a few years.
- Unrealistic collateral: Car title loans are when you give up the title to your vehicle in exchange for cash right away. If you default on your car title loan, your lender can repossess your automobile. If you depend on your car for work, this could mean losing your job, which will likely hurt your chances of repaying your loan at all.
- Don’t report to the major credit bureaus: If a lender doesn’t report your payments to any of the three major credit bureaus, that means future lenders won’t see your history of on-time payments. Payment history is one of the most important parts of calculating your credit score. If you can prove on-time payments on your credit report, you can show potential lenders you’re responsible with credit. Try to avoid lenders that don’t report your usage to Experian, Equifax or TransUnion.
You don’t have to settle for loans that forgo a credit check. Alternatives you may want to consider exist.
Secured Loan
Secured loans are loans you get with collateral. Mortgages and auto loans are both types of secured loans.
But there are also secured personal loans that let you put up savings accounts, CDs or other assets to borrow a sum of money, usually the value of the asset. Using collateral is helpful for borrowers with bad credit because it gives lenders an incentive to approve you. If you have something for them to hold on to, they are more likely to give you a loan — if you want your asset back, you’re probably going to repay your loan. In the event you don’t, however, the lender keeps the asset or account you put up as collateral.
401(k) Loan
A 401(k) loan is when you borrow money from your retirement account, like a 401(k) plan. Most of the time, these don’t trigger a hard credit check since you’re borrowing from your future self, and a lot of times, interest rates are lower compared to traditional personal loans.
One caveat is that you’re taking away money from yourself in retirement. Even when you pay it back, you’re losing the chance to maximize earnings right now. If the market shifts, earnings could drop, even when the money in your account stays the same. Most 401(k) loans let you borrow up to 50% of your vested account balance, but your employer and the plan you have might have different rules.
Peer-to-Peer Loan
Peer-to-peer (P2P) loans are when you borrow money from another person — an investor through a marketplace — rather than a bank, credit union or online lender. You could have multiple investors in your loan depending on how much you need to borrow. But you only repay the marketplace, and those funds go back to each of your lenders. This is similar to how you’d repay a financial institution if you borrowed a personal loan, but the marketplace ensures your investors are repaid.
If you’re approved with a particular P2P marketplace, investors will review your application to see if it’s something they want to invest in. Once your loan gets fully funded, those funds are disbursed into your bank account, and you’ll make monthly payments to your installment loan until your loan is paid in full.
You could face a higher APR and more fees with a P2P loan compared to a regular personal loan. On the other hand, if you have bad credit or limited credit history, you might be more likely to qualify for a P2P loan since they tend to have eligibility requirements that favor such borrowers.
Credit Card Cash Advance
If you already have a credit card, you might be able to get a cash advance. A credit card cash advance is when you borrow cash from your credit card account. Cash advances have different APRs, fees and repayment requirements compared to your purchase transactions. For instance, there’s usually a transaction fee when you take on a cash advance, which tends to come with a higher APR.
Most of the time, there’s a limit to how much you can borrow. Since you already have the card, there isn’t a credit check when you request a credit card cash advance.
If you are in credit card debt, check out our list for the best credit card consolidation loans.
Get a Co-signer
If you don’t qualify for a personal loan on your own, you may want to find a trusted co-signer for help. A co-signer is someone with good to excellent credit who signs on to your loan alongside you to help increase your eligibility. They can also help you secure the lowest interest rate offered by that lender.
Getting a co-signer helps you avoid taking out a bad credit loan and, instead, lets you get a traditional personal loan with lower interest rates. Remember that co-signers are just as responsible for your loan as you are, so try to find a friend or family member you trust as a co-signer. If you fall behind on payments, your credit score will tank — and so will theirs.
Try a Payday Alternative Loan
Some federal credit unions offer payday alternative loans (PALs). These are usually small-dollar loans, ranging from $200 to $1,000, and repayment periods go as high as six months. But amounts, interest rates and terms vary by credit union, and some might offer more — up to $2,000 — while others may cap loans at $800.
Requirements also vary by credit union. For instance, some might have loans available when you become a member, while others may require you to be a member for a set period of time before taking advantage of PALs.
PALs don’t necessarily require good credit to qualify, but it’s wise to check your employment status and income to ensure you can repay your loan. This might be a good option for borrowers with bad credit who need to borrow money. But not all credit unions offer these types of loans — determine whether yours does or what options are offered to help you avoid taking out a payday loan.
Finding no-credit-check loans may be difficult, and in some cases, your only options might be predatory loans, like payday lenders or car title loans. But you generally have more options than you think.
If you have the time, try to clean up your credit before borrowing money. If you need cash immediately, look into other ways to borrow money, like getting a secured loan or PAL, finding a co-signer or even asking friends and family for help. Do as much research as you can before completing an application, and try to ensure you’re eligible prior to moving forward.
Editor’s Note: Before making significant financial decisions, consider reviewing your options with someoneyou trust, such as a financial adviser, credit counselor or financial professional, since every person’s situation and needs are different.
