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Most lenders check your credit history when you apply for a loan. If you have a record of making payments on time and aren’t using most of your available credit, you’re more likely to be approved for mortgages and other types of loans. You’ll also qualify for better interest rates than people with a poor credit history.
If you have bad credit or haven’t yet developed a credit history, however, you may be able to qualify for a no credit check loan. Read on to learn more about the advantages and disadvantages of these types of loans.
If you have an emergency, such as a medical problem or car repair that requires quick cash, a no credit check loan might seem like a helpful option. Many of these loans offer the fast approval and immediate funds transfer you need to solve the issue at hand. Generally, no credit check loans are for between $50 and $1,000.
However, it’s important to be aware of the terms of your loan as well as the interest rate. Read all paperwork carefully before agreeing to this type of loan.
Some no credit check loans carry a super high-interest rate, often above 100%. These type of bad credit loans, often called payday loans, are known for locking the borrower into a cycle of high-interest loans that the borrower can’t repay.
Some states have capped the interest rate for no credit check loans at 36%.
If you choose this route, avoid predatory lenders that charge high rates and encourage you to take a second loan to repay the first. And don’t give a lender direct access to your bank account to withdraw monthly payments.
Even if you’re able to make timely payments on your no credit check loan, these types of loans don’t report to the three credit bureaus. That means that paying as agreed won’t boost your credit score. In contrast, paying as agreed on a traditional bank personal loan will help you improve your credit, because most banks report to at least one if not all three credit bureaus.
The Consumer Financial Protection Bureau reports that even though no credit check loans don’t help your credit score, they can hurt your score if you fail to pay. That’s because the lender can sell the debt to a collection agency, which would, in turn, report your delinquency to the credit bureaus.
If you don’t have the credit score to qualify for a traditional loan and are reluctant to take a no credit check loan with a high interest rate, you do have options. Some of the best routes to explore include:
Improving your credit expand your options when it comes to loan approval. You’ll also be able to qualify for lower interest rates and more favorable repayment terms. Here are some steps you can take to improve your credit:
The resources on Credit.com have a lot of information on how you can work on improving your credit. Compare financial products to find the right credit card or personal loan for your needs and monitor your credit with the free score and credit report card on Credit.com so you can work on any issues that might be lowering your score.
March 8, 2021
Personal Loans
April 8, 2020
Personal Loans