Can you get a personal loan without a credit check?
Getting a personal loan with bad credit can be difficult. Lenders and creditors usually require a credit check before you can borrow money, and if you have poor credit or no credit, you may be denied.
You may be wondering if you can get a personal loan without a credit check. It can happen, but you might want to think twice.
“Everything in life has a price. It is possible to get a loan with no credit or bad creditbut make sure you can agree to the terms before you sign anything,” says Scott Wenger, who has covered money and business as a journalist for nearly 30 years.
[Read: Best Personal Loans.]
Why is it hard to get personal loans with no or poor credit?
The higher your score, the more likely you will be approved for a loan and the better the terms. The reverse is also true.
“Your credit score is the best predictor of whether or not you’ll pay your future debts as agreed,” says Todd Christensen, education manager for Money Fit by DRS, a nonprofit debt relief agency. .
Most lenders require you to meet a certain credit score threshold to take out a personal loan. This score differs for each lender, but in general it should at least be within fair range.
A credit score of 580 to 669 is fair, according to credit bureau Experian. good scores range from 670 to 739, and 740 or more are very good to exceptional.
In most cases, you need a credit score of 620 or higher to pass a credit check and qualify for a personal loan.
Any lender who does not consider your credit rating as part of the qualification process is taking an increased risk in lending to you. But there is an upside for the lender: “The higher the risk the lender takes, the more they will be rewarded with higher interest rates,” Christensen said.
Can you find personal loans with no credit check?
You are unlikely to find a traditional personal loan without a credit check. Most reputable personal loan companies require a credit check when you submit your application.
Still, you can get alternative installment loans, which are similar to personal loans and can be obtained without a credit check. As with a personal loan, you will get a lump sum that you will repay according to a repayment schedule.
But the costs are higher, the qualification requirements are different, and the loan amounts are lower than traditional personal loans.
This type of loan is an alternative to payday Where title loans, which are usually available without a credit check at a high cost. You can pay a fee to renew or defer a payday loan and delay repayment.
Alternative installment loans can charge triple-digit APRs, sometimes well over 400%. Instead of checking your credit, lenders can assess your job, income, and bank account.
[Read: Best Debt Consolidation Loans.]
Are no credit check loans risky?
Personal loans without credit check carry some risk. For one thing, high APRs mean you’ll pay a lot more to borrow money than you would with a traditional loan.
If you take out a $1,000 six-month loan with an APR of 200%, you’ll pay $657.19 in interest, or more than half the loan amount. You will pay $107.59 if the APR drops to 36%. It’s cheaper, but it’s still more expensive than home equity Where low interest personal loans would.
If you turn to payday or title loans to cover your basic living expenses, you may find yourself trapped in an endless cycle of debt. More than four out of five payday loans are rolled over or reborrowed within a month, according to Consumer Financial Protection Bureau.
The CFPB also reports that about one in four payday loans are reborrowed at least nine times, and consumers end up paying more in fees than they borrowed. Similarly, almost all auto title loans are re-borrowed when due or shortly thereafter.
[READ: Best Bad Credit Loans. ]
Alternatives to personal loans without a credit check
If you’re considering a loan without a credit check, explore other options first, recommends Wenger.
Start by checking with your bank or credit union to see if they have any options that might work. Your banking relationship could mean more flexibility when it comes to lending.
If you can’t avoid borrowing money and don’t want a personal loan without a credit check, here are some other options to try.
Lenders can assess your ability to repay based on your credit and factors such as your education, income, and bank account balance.
Guarantee in pledge. You can try requesting a secured loan if you have been refused a traditional unsecured personal loan.
Although you need a credit check, you can boost your credit score with a loan secured by an asset such as a car, house, or bank account. Sure, secured loans may pose more risk to the borrower, as your collateral could be seized if you cannot repay the loan.
But if you’re confident in your ability to make payments, a secured personal loan is usually easier to get and comes with lower interest rates than an unsecured loan.
Clean up your credit. If you don’t need the money right away, you can take some time to improve your credit. When you are denied a loan because of bad credit, you are entitled to an explanation from the lender as well as a free credit report.
You can also get a free copy of your credit report from each of the three credit bureaus once a year at A nnualCreditReport.com. “The borrower should verify that the entries on the credit report are valid and then take corrective action to address any errors or negative ratings,” says Salvador Gonzalez, a Walden University accounting faculty member.
Ask a friend or family member for help. If you are unable to qualify for a traditional personal loan on your own, you might consider apply with a trusted co-signer. But proceed with caution.
Although you are the primary borrower, the co-signer is also responsible for your debt. If you don’t pay, your co-signer’s credit will take a hit and debt collectors could sue your co-signer.
Alternatively, you could borrow money from a friend or family member, which would mean little or no interest, depending on your agreement. Yet this arrangement can be just as risky.
“Loans from family members can easily lead to bad feelings or broken relationships, but in some cases they can make sense,” Wenger says. “Financial planners routinely advise putting the terms of any family loan in writing to avoid misunderstandings.”
Whatever type of loan you choose, know what you’re getting into before you borrow.
“If you’re not completely comfortable in your understanding of all the terms of a loan, you need to ask an expert who isn’t the lender,” Wenger says. “Money isn’t free; if you don’t pay it back on the terms you’ve legally agreed to, there will be consequences.”
More from US News & World Report