Unlike loans offered by traditional banks, no credit check loans do not rely on data from your credit report or credit score to determine the risk associated with a borrower. If you have bad credit, or no credit at all, this type of loan will greatly assist you in the approval process. In this article, we present you what a no credit check loan is and the advantages and disadvantages of these.
What do lenders rely on when making a loan without investigation?
That said, private lenders are able to offer loans without a credit check to potentially risky customers because they offset the equation with higher interest rates and fees. So while you won’t have as much trouble getting approved as you would with a bank, quick loans online can be more expensive overall.
But a no credit check loan does not mean a no credit check loan at all. Lenders would quickly go bankrupt if they lent without any form of due diligence. Instead, these lenders rely on the stability of your income and your overall debt load to determine how much money you can borrow.
Before you apply, be sure to compare several lenders and ask them about eligibility criteria and associated costs. While you’re at it, keep in mind that the weaker your finances are, the less affordable loans tend to be. Plus, your credit situation could get worse if you have too many irregularities in your future payments.
The benefits of no credit check loans
There are some advantages to personal loans without a credit check, of course; these may vary depending on the company you deal with.
Your credit score is not taken into account!
Of course, the most notable advantage of no credit check loans is that having bad credit or no credit history will not hurt your approval.
Approval depends on other aspects:
Instead of focusing on your credit or past debt problems, most private lenders simply need to confirm that you will be able to make your payments, interest and fees, with reasonable frequency.
The approval is often very fast:
With a traditional bank or institution, it can take several business days to get approved, and sometimes over a week to receive the money. With a no credit check loan, you often receive the money quickly, sometimes the same day.
The dangers of loans without a credit check
While there are some advantages to no credit check loans, it would be unwise to ignore the disadvantages:
More expensive:
As mentioned, private lenders often charge higher rates and fees to compensate for the risk they take in accepting higher risk clients. While their interest rate is often very reasonable, they often have other associated fees that can add up quickly if you don’t pay back according to the terms.
Consequences in case of default
Missed payments may result in higher administrative fees and in some cases, additional interest. If your loan is secured, your car or other property could be seized as payment. In the case of a loan with co-signer(s), they could also end up with a negative impact on their credit rating.
Beware of fraud:
Private lenders are more difficult to regulate and many scammers seek to take advantage of your situation. They may take advantage of your lack of options to charge illegally high rates for substandard loans or worse, steal your money, financial information and identity. Make sure the company you choose is accredited with the authorities in your province.
What are the requirements for a no credit check loan?
While eligibility requirements may vary from company to company, here are some of the things they may inspect when you apply:
Income:
While some lenders are more flexible than others, most require that you have stable employment and a monthly income of at least $1,000 to $2,000. It is becoming more common to require that you be paid by direct deposit; this makes it easier to assess your income and frequency.
Bank statements:
To demonstrate the reliability of your income, you will generally need to provide your most recent bank statements (last 30 to 90 days). Lenders may also use this information to determine your overall debt load. Some lenders make it easy for you by sending you an instant bank verification request; you simply log in to your account rather than having to provide specific documents.
Identity documents:
Usually transmitted electronically by scan or photo; lenders will ask for one or two pieces of government-issued photo identification, such as your driver’s license and passport. This is to confirm that you are of the required age and that you are a permanent resident.
Recent invoices:
To verify your address, some lenders will also ask for a utility bill (electricity, water, etc.) or other proof of residence.
Personal references:
It is common practice to ask for one or two personal references during the approval process. These are not solicited for your loan application, but they serve as a safety net if the lender is unable to reach you.
Information on co-signers or assets:
In the case of a co-signer or guarantor loan; the lender must also inspect the finances of your co-signer and/or any collateral you offer.
The key to a good personal loan without a survey?
Having a good loan experience, even with bad credit, is all about consistency. Regardless of the terms of the loan, it’s often when you miss payments that a private loan becomes expensive. Make sure you make your payments on time, or contact your lender in a timely manner to work out an agreement, so your loan doesn’t become a liability.
