No Credit Check Loan

No Credit Check Loan
A no credit check loan is a type of loan in which a lender evaluates your creditworthiness without conducting a “hard” credit check.

What is a No Credit Check Loan?

A no credit check loan is a type of loan in which a lender doesn’t conduct a “hard” credit check. With a hard credit check, the lender reviews your credit report and credit score. Too many hard credit checks can lower your credit score, as they indicate that you’re applying for lots of loans and might have money problems.

With a no credit check loan, the lender doesn’t conduct a formal review of your credit report. However, not all no credit check loans are the same. With one kind, the lender conducts a “soft” credit check that lets them evaluate your ability to pay but doesn’t damage your credit score.1

With the other kind of no credit check loan, the lender conducts no credit check whatsoever. This form of no credit check loan is common among payday lenders, who provide loans to customers they know are unlikely to make payments on time. Payday lenders profit when you fall behind on payments because it allows them to charge additional interest and fees.

Are No Credit Check Loans safe?

The answer, in general, depends on whether the lender conducts a soft credit check or no credit check at all. Lenders who conduct no credit check at all are notorious for predatory practices.

When considering a no credit check lender who conducts a soft credit check, the answer varies from lender to lender and loan to loan. Always do your research to find a safe and reputable lender. Also, be sure to comparison shop to find the lowest APR and best payment terms.

Is a No Credit Check Loan from a payday lender safe?

Never.

Predatory lenders—like payday and title lenders—offer no credit check loans, but their no credit check loans are very different from a loan in which the lender conducts a “soft” credit check.

Payday lenders profit when you miss payments. They get to charge additional fees and interest, so it’s in their interest to lend to customers who won’t make payments on time. When they offer you a loan without a credit check, they know there’s a chance you might have difficulty making payments. But this is an opportunity for them to make money, even if it has terrible consequences for you.

Why do lenders conduct credit checks?

Credit checks allow lenders to determine your creditworthiness. They’re considered a useful tool in predicting the likelihood that you’ll have the ability to repay a loan. Lenders use them to decide whether to grant or deny your application, and they help them make sure that they don’t offer loans to someone who can’t repay them.2

While useful for lenders, credit checks can be seen as an important protection for borrowers too. They help ensure that you don’t receive a loan that you’re unlikely to repay. While a credit check may mean that you don’t receive a loan if you have bad credit, a denial is likely better than receiving a loan that you can’t afford and traps you in a cycle of debt.

What are the benefits of a No Credit Check Loan?

One benefit of no credit check loans is that your credit score won’t be damaged by a hard credit check. Another benefit is that they make it easier to qualify for a loan if you have bad credit. When you apply for a no credit check loan, the lender doesn’t look at your credit report or credit score, so if your score is low, the lender won’t see it.

What is a payday loan?

A payday loan is a type of no credit check loan that’s linked to predatory practices. The typical payment term for a payday loan is two weeks, and if you don’t pay back the full amount of the loan with fees and interest in that time, you’ll be forced to pay a fee to “rollover” the loan and extend it. This can easily trap you in a cycle of debt, as you continually extend the loan without ever actually paying it off fully.

What is a title loan?

A title loan is another common no credit check loan that has been linked to predatory practices. With a title loan, you offer your car as collateral. If you default, the lender can seize your vehicle and sell it to make up the money you owe.

Given that there’s a good chance that your car is necessary for transportation, title loans are rarely worth the risk. Like payday loans, they have short payment terms and extremely high interest rates, so it’s easy to fall behind. One study found that as many as one in five title loan borrowers lose their car.3

How can I get a No Credit Check Loan?

If you want a no credit check loan, be sure to avoid predatory lenders like payday, title, and pawnshop lenders. To secure a safer and more responsible no credit check loan, consider seeking out personal installment lenders with more favorable rates and terms. Check customer reviews and Better Business Bureau accreditations before committing to a loan.

Bottom Line

While no credit check loans are a way for borrowers with bad credit to get much-needed cash, a quick influx of money isn’t worth it if it traps you in a cycle of debt. Payday and title lenders—who have been linked to predatory practices—offer no credit check loans because they stand to profit if you have trouble repaying them. When considering a loan, look for a lender who conducts a soft credit check. There are safe and socially responsible lenders who can provide the money you need now.

Works cited:

1 Lee, Jenna. “The Difference Between Hard and Soft Credit Inquiries.” Money.USNews.com, 24 July 2014, http://money.usnews.com/money/blogs/my-money/2014/07/24/the-difference-between-hard-and-soft-credit-inquiries. Accessed 7 April 2017.

2 “Legal Credit Reports—Who Can Access Your Credit History.” CreditInfoCenter.com, 18 Feb. 2016, http://www.creditinfocenter.com/creditreports/legally-pull-credit-reports.shtml. Accessed 7 April 2017.

3 Sullivan, Bob. “1 in 5 Title Loan Borrowers Lose Their Car, Report Finds.” Credit.com, 18 May 2016, http://blog.credit.com/2016/05/1-in-5-auto-title-loan-borrowers-have-their-vehicle-seized-144700/. Accessed 3 April 2017.