People with bad credit scores often look towards no credit check personal loan companies online for help during a financial emergency. You can obtain small amounts practically overnight, but at a very high cost. You pay a big price to have the company ignore information on your consumer report.
Expect to pay dearly for the convenience of borrowing money without a credit check. Expect the most onerous terms if you qualify things further with an instant approval, no banking account, no employment verification, no guarantor, or no collateral.
- Review common terms and conditions
- Differences between secured and unsecured
- Direct and agent-based online loan companies
Personal Loans without Credit Check Review of Terms
If you have a bad credit score, take a few minutes to review commonly searched terms relating to online personal loans without a credit check. You are asking the company to lend you money without using their most important underwriting tool – a copy of your consumer report and score. Every action has an equal and opposite reaction.
Start a personal loan request by completing the online form. Each special qualifier you add on top of “no credit check” can add an extra hidden cost. Review the possible dark side embedded in low-interest rate offers, instant approvals, no employment verification, no bank account, and no guarantor.
Read the fine print before signing off on terms, if an online company quotes a very low-interest rate on an installment loan without a credit check. Most likely, you are paying an upfront origination fee in lieu of interest charges.
Banks charge interest rates to reflect the time value of money, to overcome the risk of default, and to provide themselves with a return for their investment. Accounts approved without credit checks usually have extremely high default ratios.
A quote with a low APR is a red flag for a large origination fee, coupled with a very short repayment period. These fees add up very quickly as you must pay the origination fee over and over again if you cannot satisfy the principal balance in full during the stated term.
Legitimate companies will quote origination fees as part of the annual percentage rate (APR). This is a legal requirement.
Online companies offering personal loans without a credit check and instant approval must simplify the application process in order to provide a quick decision. The problem is that they already have one hand tied behind their back – they are not pulling a copy of your consumer report or score.
They also cannot ask you to fax supplementary documentation when promising a same day decision. They can only rely on the information you type into the online web form. Otherwise, the online approval process could take more than 24 hours.
Expect to pay extra for the fast approval turnaround using limited underwriting information. Also, expect the company to contact you over the phone to verify information on your application. Make certain that you provide your correct phone number.
Online companies marketing personal loans without a credit check and guaranteed approval must ignore all the basics of underwriting. No legitimate company can offer guaranteed approval – especially when they are not pulling a copy of your consumer report.
It makes no business sense whatsoever. The lender cannot send money to every person filling out an online form. Identity thieves would quickly descend to steal their money using fake information. They would be out of business within days.
Beware of any provider making this false promise.
No Employment Verification
Asking an online company to underwrite a personal loan without a credit check or an employment verification means they must ignore their two most important risk-management tools.
- Your consumer report and score predicts likely future default.
- Employment verification confirms that you have a reliable income.
- Proof of income for the self-employed demonstrates the capacity to borrow.
Companies can fund payday loans without a credit check because they expect your employer to deposit money into your bank account at the end of the next payroll cycle. Without an employment verification, they have no assurance this will happen.
If you have no job, some online companies will fund applicants living off unemployment or disability benefits. However, both of these entitlement programs replace only a portion of income, which makes repayment very challenging.
Once again, expect to pay far more in origination fees and interest charges for a loan with no employment verification and credit check.
No Bank Account
Finding a no credit check personal loan online without a bank account is very difficult. Most online companies will require that you have a checking account with a bank, and ask that you provide the account and bank routing number on the application.
Young adults and first-time borrowers will find it very difficult to obtain a personal loan online without a bank account for three reasons.
- A bank account verifies that you are a real person, and not an identity thief.
- Direct deposit is the fastest way for the lender to transfer your emergency cash.
- The lender will automatically withdraw scheduled payments from the account.
Personal loans with no credit check and no guarantor are yet another combination that increases risks to the online companies. A guarantor is another person (most often a parent or other relative), who co-signs the note and agrees to take over payments if you fall behind.
The guarantor should have a second source of income that would continue if you lost your job or became unemployed. Two income sources are better than one. Online companies face a higher risk of default without a co-signer assuring prompt, on-time repayment.
Once again, expect to pay higher origination fees and interest charges when taking out a no credit personal loan without a guarantor.
No Credit Check Personal Loan Types
The type of personal loan without a credit check also determines the origination fees and interest charges paid by people with a bad credit history. Not all borrowing accounts carry the same risks to online companies. Unsecured accounts do not require collateral, whereas title and payday loans do.
Collateral makes borrowing money risky. Therefore, expect to pay higher origination fees and interest rates for unsecured versus secured notes.
Unsecured personal loans with no credit check have the highest loss ratios. The company must approve the application based only on the applicant’s signature, or a written promise to repay the obligation according to term.
If the borrower defaults on an unsecured installment loan, the lender cannot repossess a signature. They must first sue in court and win a judgment. The judgment then allows them to attach a lien against the borrower’s assets (house, car, bank account). A judgment also allows them to garnish wages.
However, lawsuits are expensive to file, take time, and is not a guaranteed win. Therefore, unsecured personal loans with no credit checks have the highest fees and interest rates, and/or have the lowest approval ratios.
Secured (with collateral) personal loans without credit checks have lower loss ratios. The company approves the application knowing that they can take possession of the pledged collateral to offset losses during a default.
If the borrower falls behind on payment on a secured installment loan, the lender can repossess the collateral without first filing suit in court, and win a judgment. They begin the relationship with a contractual relationship with the right to seize your property in the event default.
Therefore, secured personal loans without credit checks have slightly lower origination fees and interest rates, and/or higher approval ratios. Expect minor variations between the title and payday advances.
Vehicle title cash advances are a secondary form of secured (with collateral) personal loans that do not require a credit check. The online company secures the note using the title to your car. They do not need to pull a copy of your consumer report because they can repossess your automobile if you default on repayment terms.
You must own your car free and clear in order to qualify. If you are still making payments on a car note, this form of borrowing money for emergency cash needs is not for you.
Payday cash advances are the primary form of secured personal loans that do not require a credit check. The online company secures the note with a post-dated check for the amount borrowed, plus a fixed fee. They fund the transaction for the post-dated check less the fixed fee. They do not need to check your consumer report, as they have already secured repayment.
The lender holds the check until your next payday and automatically debits your account on that day. If you do not have sufficient funds to repay the note, you can choose to roll over the amount due and incur another fixed fee.
While the fixed fees are relatively small compared to the interest rates charged on notes with longer repayment terms, once you begin rolling over payday advances the amounts grow quickly. Be advised.
No Credit Check Personal Loan Companies
For people with bad credit ratings, the final area to explore is the difference between no credit check personal loan companies that operate online and in stores in your local geographical area. In addition to the contract terms and possible use of collateral, the place where you apply can make a difference to your overall experience.
Decide for yourself the pros and cons of working with direct lenders, lead brokers, and local stores.
Many people search diligently online personal loans without a credit check from direct lenders only – not brokers. They perceive that borrowing from a direct lender a better overall option. A direct lender sounds better on the surface than dealing with an intermediary. That may not be the case for everyone.
When applying online through a direct lender you are working with a single enterprise. For an applicant with bad credit, a single source has benefits as well as drawbacks.
Benefit of online direct lenders
- Single point of contact
- You can research the organization before applying
- Your personal information stays with only one party
Drawbacks of online direct lenders
- May charge higher fees and interest
- Less likely to approve your application
Submitting an online application to a no credit check personal lead broker is the opposite of working with a direct lender. Now you are working through a third party or agent who represents many different companies, rather than dealing directly with a single enterprise.
Any legitimate provider will make it clear upfront whether you are applying directly or through a lead broker or agent. Read the disclosure language carefully on any online application form.
Many applicants find that dealing with a broker or agent is a better option. When your qualifications are poor, you need greater choices. Brokers can present your application to more companies who may say yes.
- Higher approval ratios – you connect to a network of companies rather than just one.
- Lower-cost terms – you may receive several competing offers
Local stores are the final no credit check personal loan option. Drive down the main street of any main street in America to find a retail storefront location offering same day approvals and other alluring quick fixes for your financial emergency.
If you prefer working with a company located in a place near you, then a local store is a solid option. Do your homework as you would with any other option. A local retail store is not necessarily a direct lender. It depends on the location, as well as your qualifications.
In summary, beware of any no credit check personal loan company – online or at a retail store location. Borrowing small amounts through this channel is convenient, but the fees are extraordinarily high. Do not make it a habit.