Loans For People With No Credit
Generally, young people are those who encounter the most problems when trying to apply for a loan. Why? The main reason is that they have no credit history, so banks can’t generate their credit score. This matter is also problematic for new immigrants or people who have no credit in their names, even though they have avoided debts for years now. However, financial problems can hit anyone, and you may find yourself in need of money even though you have no credit history. What is the solution for you then? Most probably, you should go with a no credit check loan.
Understanding No Credit Check Loans
This type of loans is designed to help those who come across difficulties and rejections when applying for other loans, because of their credit check. Most of the U.S. banks collaborate with credit reporting agencies, such as Experian, Equifax, or TransUnion, which are meant to store credit history and credit score. If an individual has a bad credit score or no credit, banks are less likely to offer him/her a loan.
When it comes to bad credit, it is simple to understand why a bank does not hurry to offer loans. But what are the reasons behind their hesitation to lend people with no credit? If your credit history is not that complex or does not exist at all, the lender cannot know what to expect from you, can’t determine your reliability, which means that the risk of not having the loan repaid in full is high.
But in this case, how can a bank trust you to offer a no credit check loan? This kind of loan is generally approved based on your repayment history. In most cases, you can get the loan if you prove to have a responsible financial behavior. In the U.S., several banks and non-profit organizations take the risk of providing no credit check loans, in order to assist people who deal with financial problems or looking to establish credit. They collaborate with specialized agencies which give details about your financial behavior or do their own evaluation.
Features of No Credit Check Loans
The features of no credit check loans are generally similar with those of other types of loans. Moreover, because not many banks or organizations provide this option for people with no credit history, the features don’t vary widely. Mainly, they include the following aspects:
- Fast approval
- Speed of accessing cash (from 1 hour to 24 hours)
- Possibility to apply entirely online
- Online account management
- Debit card (in some cases)
*If you are borrowing money to pay for general living needs such as groceries, utility bills or other essential household needs, there are other free assistance options available.
No Credit Check Loans Options
As it was already mentioned, there are not many financial institutions that offer this opportunity of no credit check loan. For this reason, the options are usually quite limited. However, you should know that an individual with no credit history is more likely to obtain a good loan, with lower interest rates and a faster approval than one who proves to have bad credit. Let’s see the main options you should consider when trying to obtain a loan, but have no credit history.
- Get authorized as a user on a family member’s credit card – becoming an authorized user on a credit card which belongs to someone else will automatically build you credit. Most probably, a family member can help you with this matter. The process is simple, and it does not require approval. The cardholder only has to add you as an authorized user. Then, you will receive a card with your name on it, and even though you won’t use it at all, the payment history of the card is reported to specialized agencies, and your credit starts to be built. You can also ask a reliable friend for this favor. The best part is that neither you nor the primary card holder has to pay anything.
- Co-signer - asking another person to co-sign for you will definitely increase the chances of obtaining a no credit check loan because the bank is exposed to a lowered risk of not receiving all the money back. But you should know that the co-signer is also liable for the debt. So if the repayments are not made, he/she will also have to suffer. However, if no credit history is your issue, but you are a responsible person, most probably you will find a family member or a friend to sign for you.
- Secured credit card – this type of card necessitates a security deposit, which is a form of collateral against the credit line. However, the problem is that credit limit is usually very low, between $300 and $500. So, usability may be a problem with this option if you need more money.
- Micro-loan – These loans are designed especially for those who have a financial emergency, and their term is very short, usually between 15 and 30 days. Also referred to as emergency loan, this option comes with features such as very fast approval services, but high APR. So, before applying for a micro-loan, make sure you have already tried or at least studied several other options because this one will cost you much.
- Secure loan – similar to the secured credit card, this loan uses one of your properties as a guarantee. For example, if you own a vehicle or a house, you can use it as security for your no credit check loan. But this means that the lender can access your property in the case you don’t make the repayments.
- Loan Broker – if you don’t have enough experience in the economic field, finding a bank or an organization which offers loans for people with no credit can be problematic. Then, looking for the suitable features for you is also confusing. But a loan broker has vast experience and relationships with lenders, so he/she can provide you professional help and varied solutions for your financial problems, which will be specially tailored to your needs.
Pros/cons of No Credit Check Loans
Getting money in no time may seem the ideal solution for you, but unfortunately, there are not only advantages which come with this option.
- Speed access to cash
- Fast approval
- Easy application process
- Not many providers
- Less flexibility in repayments compared to other loans
- High-interest rates
- Limited amount of money you can borrow
Eligibility for No Credit Check Loans
Generally, the lenders that provide this type of loans have the same requirements when filling in an application form:
- 18 years old or older
- S. citizen or permanent resident
- Evidence that you currently have a job
- Purpose of the loan
- An active bank account
If the bank or organization which offers no credit check loans allows people who have no permanent residence to access money with this option, most probably it will also ask for the period of current residency.
How to Apply for No Credit Check Loans
Commonly, you can apply both online or in a lender’s branch. Make sure you know exactly what the documents you need are (for this, you may check the bank’s website or call them for more information), and then the whole process won’t take longer than a few minutes. For this type of loan, you need identification, proof of a regular income you earn, evidence of address, and in most cases, an active bank account will also be required. Other details are provided by each institution which offers this type of services.
FAQ for No Credit Check Loans
What is the maximum amount of money I can borrow with this loan?
The value of your loan is influenced by two aspects: the law of your state regarding this issue, and the bank or organization you are opting for. In some states, you can borrow only 70% of your monthly salary while other do not have a limit. On the other hand, the institution which provides you the loan also has its own rules. For example, many allow a no credit check loan of $1,000 or $2,000 maximum, but you can also get up to $5,000 with other lenders.
Is it better to build credit or to opt for no credit check loans?
The answer to this question depends on your needs. If an unforeseen event happened recently and, at the moment, you have a financial emergency, most probably there is no time to start building up a strong credit history. In this case, opting for no credit check loans may be the right, if not the only, solution for you.
On the other hand, if you can wait before borrowing the entire amount of money you need, building credit is a good idea. Why? This way, you can create an excellent credit score, which will bring you better options. Such a credit history may allow you to access much more convenient loans, with lower interest rates, flexible repayments and other features you may need.
Do all no credit check loans need security?
No. There are also banks and organizations which provide this type of loans with no security required. However, you should pay particular attention to these details before signing any paper of filling in an application form. Furthermore, a no credit check loan that needs no security may have a significantly higher interest rate and inconvenient terms.
Are there any other finance options available?
Depending on your financial situation there may or may not be multiple options. Those who have a high income with low expenses will have more options than a low income earner with low expenses. This is based on the serviceability of the loan. A higher income earner has more money which in theory means lesser chance of default on repayments. There are however specialized loan products created by banks, non-profits and credit unions for low income borrowers.