Nowadays, the buzz in social media is that some lenders are not performing any credit checks before issuing loans to borrowers. Most of these are small loans that borrowers can settle in a short span. Is it true? Do the lenders give the loan without any background check or assurance? If they do, what documents do you have to submit to get the loan? Are the No Credit check loans better than the typical loans which are available?
Usually, for Banks and Financial Institutions to process a loan to an individual, they have specific eligibility criteria. The credit score is one of the eligibility criteria and is mainly considered for the loan to be processed. In normal circumstances, individuals with a bad credit score cannot get a loan; this is where the No Credit check loan comes into the picture.
Through this article, the reader will understand What a No Credit check loan is, how it is operated, and judge if he/she has to go for a No check loan if offered.
What is an Online Loan No-Credit Check?
Loans issued to the Low Credit score profiles without any hard credit score check are known as the No Credit Check Loans. No check loan is a marketing term used to lure applicants with a low credit score.
As No Credit Check Loans are for a shorter time, the lenders usually set high-interest rates on these loans.
Generally, borrowers with a low credit score are apprehensive about applying for standard loans. They fear that multiple individual hard credit checks might further damage their credit score. Hence, they apply for No Credit Check Loans. However, this is not true; no lender issues a loan without any credit check. Lenders normally conduct a soft check on the credit profile, and then lenders process the loan amount. The rate of interest is usually high for the No credit check loans.
Here are some alternatives to no credit check loans:
- Instalment Loans
- Guarantor Loans
- Secured Loans
- Log-book Loans
- Short term Loans
Instalment Loans: In this type of loan, the lender processes a small unsecured amount to the borrower for a higher APR%. The amount has to be repaid within 24 months. One has to be aware of the Repayment period and the APR before availing of the Instalment loans, and regular repayment of the instalments helps improve your credit score.
Guarantor Loans: A guarantor loan is a loan wherein a close friend or family member partakes in the loan’s obligations along with you. Lenders usually prefer guarantors with a good credit history and stable income.
Secured Loans: These loans are generally secured by collateral, and the interest rates are low. The amount that the borrower wants can be proportionate to the collateral assured. If the borrower cannot repay his debt, the lender will have the right to repossess the property and recover the amount. Secured Loans are a risky proposition from a borrower’s viewpoint.
Logbook Loans: It is a type of a secured loan in which the borrower uses his/her car as a security to avail a loan and continues to drive it. If the borrower cannot repay the loan, then the lender will have the right to reclaim the vehicle for the amount lent.
Short-term Loans: These loans are specifically designed for borrowers with a low credit score. The lenders offer a small amount of money for a short repayment period, usually around a month. The interest rates are based on the credit profile of the borrower. If the Credit rate is low, the interest rates could be high. These short-term loans provide instant access to the funds in times of emergency.
Payday Loans: A payday loan is a high-cost short-term loan that you can borrow to cover an unexpected financial crunch. You can pay off a payday loan within a week or a month.
What factors to consider before availing of Private loans for a Bad-Credit?
Are you really in a crisis: The borrower has to examine his situation and apply for the No credit check loan only if he needs the amount? If not, the borrower may wait until the credit score is improved, which helps him/her get a better deal.
How much you need to borrow: The borrower should have a clear idea of how much to borrow. Typically, the amount borrowed is inversely proportionate to the interest rate; hence high the amount borrowed, the low the interest rate would be. But it’s important only to borrow the amount you need because the missed payment can decrease your credit score and makes it more challenging to get credit in the future.
The repayment period and Amount: Always keep a tab on the repayment amount and how long you want to borrow. Generally, a longer loan term helps you in a lower repayment amount but will cost you up more as you will pay more in terms of interest.
Drawbacks of availing a Small Cash loans Bad-Credit:
Higher Interest rates: As these loans are issued to the Low Credit Score profiles, the borrowers pay high interest rates on the loans availed.
Risk of Repossession: There is a high risk of repossession of the collateral offered for the secured loans in case you fail to repay the loan
Additional Charges: You will end up paying extra charges such as arrangement fees, bounced payment fees for the No Credit check loans.
No gauge on the borrower’s repayment capability: There is no tool to check the borrower’s repayment capability. One has to analyse the risk they are willing to take in availing a no credit check loan.
Conclusion: You might feel this is a perfect solution to your cash crisis. But, be aware that the lenders do run a soft check on your profile before processing the loan. So, it is better to analyse your situation and the risk appetite you want to take before availing of the loan. Always do consider the factors and the drawbacks involved in it.