What Is a No Credit Check Loan?
When creating a no credit check loan, a lender doesn’t check the borrower’s credit score. In contrast, lenders usually run a credit check with a company like FICO in order to decide on a borrower’s creditworthiness.
An originator of a no credit check loan doesn’t review your credit history. The lender might base your worthiness to borrow on other factors, such as your upcoming paychecks, and might charge a higher interest rate than a lender that does perform a credit check.
Why Apply for a No Credit Check Loan?
Some companies that offer no credit check loans set them up to help consumers with poor credit scores. This type of loan can give you advantages such as these:
- Sending credit score requests can actually lower your credit score, so a no credit check loan can maintain your current FICO score in that respect.
- This type of loan can allow a borrower with a poor credit history to pay on time, which can help you build a better credit score.
- A no credit check loan can be much easier to qualify for, giving you a chance to get the money you need for an emergency or another situation.
- The lender may offer a very quick approval process and a funds transfer within 24 hours.
Are No Credit Check Loans Safe?
Some are safe, and some are not. It’s important to carefully read the terms of the loan and to understand for yourself whether you can repay the loan safely.
A credit check is actually pretty good at telling you if you are creditworthy or not. Without one, you’ll need to be extremely responsible for only borrowing what you can afford and paying it off on time.
You should be especially cautious because the interest rate—basically the cost of borrowing the money—on this type of loan can sometimes be larger than the amount you borrow!
You can avoid paying much interest if you pay the loan off quickly, but otherwise, you may pay a much higher rate than what is charged on other loans. However, some customers may value a no credit check loan when they need money fast and can pay it back quickly.
How Can I Get a Good No Credit Check Loan?
Some lenders treat their borrowers well with this type of loan, explaining the process honestly and helping the customer to borrow safely.
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