If a credit loan prevents you from getting a loan, it may be possible to borrow without trusting your credit history. However, you need to be careful when not using credits to check credit. These loans are expensive and make sense when all other options are off the table.
Do you really need one?
Before using a non-credit facility, make sure it is the right approach. Your credit may be bad, but it’s always worth applying for a traditional (and most likely cheap) loan.
If they say no, that’s fine – you can always look at other options. But you never know for sure until you ask.
Visit your bank or credit union and ask what your lending options are. If you are not buying a car or home, you will most likely want a personal unsecured loan. These loans allow you to do whatever you want with the money, and they can provide more time for you to pay off a loan than a credit loan. Perhaps most importantly, they come with lower interest rates and fees – so it will cost less to borrow. Much less. Loans from traditional lenders also help you build credit while credit loans do not.
- See how credit rating works
It is important to understand that lenders are not in the business of losing money. If someone is willing to lend you money without checking your loan, they do it for a price. Make sure you know what that price is before you sign up.
They will usually charge high interest rates along with various fees to offset their risk. If you can avoid paying that price, do it.
Generally speaking, it is best to avoid credit checks for loans unless you are really out of options. They should not be used to buy “wants” or luxury – they are best for “needs”. If you need to repair a car so that you can continue to work (and generate income), one of these loans can make sense.
The same goes for a medical procedure where you have no other way of financing.
Types of credit
No credit check loans are typically short-term loans that you get relatively quickly. These are generally not loans that you will repay over several years; some weeks or months is more common. They are largely like day-to-day loans, which are expensive short-term loans. In fact, a lot of credit check advertisements for credit are really not just advertisements for payday loan programs. Lenders do not make these lending decisions based on your credit. Instead, they look at your income and assume that you will keep your business long enough to pay off the loan.
Another common type of loan is the long-term loan that you get on a lien. For example, car title loans allow you to borrow against the value of your car. The lender gives you cash, but in return you are authorized to take your vehicle if you fail to repay the loan on time. These loans can be especially problematic if you need your car to get to work and continue to earn income.
Borrowers looking to borrow without credit requirements are desperate, so it’s naturally easier to find scammers in this space.
The most common scams involve charging fees while providing nothing in return.
Receiving fees are not noticeable, but beware of lenders who want to pay upfront – you might not get what you pay for. The fees should be clearly disclosed in advance. If you get “surprises,” start worrying. Reputable lenders will tell you what to expect, while scam artists take everything they can for as long as you give them away. Any fees should be taken from your loan proceeds after your loan is approved.
You should also pay attention to the type of information your lender is seeking. Do they want your Social Security number? Why do they need it if you don’t care? They may end up covering your credit (which may affect your credit scores) or use information for identity theft. If you are not 100% sure who you are dealing with, keep your Social Security number for yourself.
If it sounds too good to be true, it usually is. Beware of overly optimistic promises: no one can “guarantee” you anything – especially if you don’t (they need to know a few things about you before deciding whether or not to lend). Remember also that these loans will always be expensive because they are risky loans. Unless you see some major costs (high interest rates or loan processing fees that will be drawn from your loan proceeds), you probably don’t get the whole picture. Lending online is safe, but only with lenders who fully disclose costs and risks.
- FTC Advance Credit Alert
To avoid these types of loans in the future, start building a loan as soon as possible. One day you will be able to borrow much less, and you will have more options for you (such as long-term loans and higher credit limits) if you build a loan. See How to make a loan for more information.