If you have no credit history or a low score, you might think that it is impossible to get a personal loan, but you would be incorrect. You can find no credit check loans, though it might not be easy. As such, you’ll have to work hard and research your options thoroughly.
The first step is to focus on applying for loans that don’t require credit checks. Many times, they have higher interest rates, stricter terms, and aren’t the best choice for people who might qualify for conventional loans. However, if you have already checked your credit report/score and know that you won’t get a traditional loan, this is another option. It’s a little safer than a payday loan.
Know Your Score
Most people without a credit history have a ‘thin credit file,’ which means the report contains just a few accounts. These people have problems getting new credit because of their lack of long-standing credibility. It’s a risk to the lender, and the company is unlikely to want to take that risk.
Other people just have bad credit. Regardless, it’s important to know what your report shows before applying for loans. That way, you get an idea of where you stand. Sometimes, consumers are shocked to realize that their score is better than what they imagined, and they can apply for a regular loan without issue. If your score is as you think (or worse), no credit check loans are your best choice.
No Credit Check Loans Directly from Banks/Lenders
It is usually best to go directly to the lender or bank if you don’t have good credit. Sometimes, you can prove your creditworthiness through income or employment. Many lenders now use alternate data to establish whether you’re a risk to them. They’ll check other information than the credit report to get a better idea of your financial profile.
Sometimes, alternative data can improve your chance of approval for a personal loan. You might also get better terms. Things a lender might consider instead of or in addition to your scores/reports include:
- Bank accounts in good standing
- Low debt to income ratios
- Having a history of on-time payments
Even though it’s a popular motto, it’s also a good idea to be prepared. Once you have researched banks that use alternative data to determine creditworthiness, you have to prove that you are worthy. Make sure you have all the records and documentation you’ll need to show that you’re financially stable. Consider bringing:
- Tax returns (last two years)
- Pay stubs as employment history
- Bank statements
- Credit card debt documentation
- Borrowing history (auto, student, home loans)
- Education records
Where to Go
The first thing to do is to go online and search for lenders that use other data. These companies tend to provide better rates and terms for people with scant credit histories. Of course, you might still need to have something on your credit report, but the lender looks at your entire financial profile.
Another option is to go to your credit union. If you’re a member, you might have better luck with approval. The staff know you and can see how much money you have and that you pay bills on time, especially if you use the app’s bill pay feature.
While most people try not to, payday and title loans are also examples of no credit check loans. Typically, they have significantly higher APRs, and you’re expected to pay them off in a short amount of time. It’s very easy to get into recurring debt by using them, so it might be best to use them as a last resort and only when absolutely necessary.