The greatest financial pressure rarely comes from the long-term debts that have been accrued, but usually by the unexpected expenses that crop up without warning. These make finding cash fast a priority, and when bad credit scores are involved then securing personal loans with no credit checks becomes necessary.
The challenge in finding a lender willing to grant loans to individuals with extremely poor credit histories is not easy. While applicants with scores of between 580 and 650 might be accommodated by traditional lenders, anyone with scores of less than 580 may find it very difficult - especially when in need of fast loan approval.
But lenders who offer approval processes with no credit checks provide fast access to personal loan funds, and ensure even those with terrible credit scores have a chance of securing the cash they need to deal with financial emergencies.
Meet The Necessary Criteria
There are a variety of advantages to getting a personal loan with no credit checks (see below) but, to access them, it is necessary to meet basic criteria first. There is no surprise in these criteria, with the law stating only individuals aged 18 and over can get loans, while applicants also need to be US citizens or be a legal long-term resident.
Perhaps the most important condition is that the applicant is in full-time employment and has held that job for a minimum of 6 months prior to submitting the application. And while taking no time to carry out a credit check means fast loan approval is more possible, there is a need to prove affordability.
If the job held by applicant is well paid, their cause is helped greatly. But affordability is proven only when the excess income confirms that the repayment on the new personal loan can be made comfortably.
Advantages On Offer
When a financial emergency strikes, the priority is time. Usually, applying for a loan involves submitting the application and waiting for at least 24 hours, but up to 72 hours, to receive news on its approval or rejection. Getting a personal loan with no credit check means the waiting period is slashed to just a few minutes.
This is because the process involves the use of computer programs that calculate the terms of the loan, assessing affordability based on the information provided. This can be done in a matter of seconds, while some minor issues available via your Social Security Number is checked too.
Because there is no credit check carried out, time is saved and the chance of a fast loan approval is good. However, there are some negatives to consider too, especially when the most common personal loan available with these terms is the payday loan.
Payday Loans: Points To Consider
The chief advantage of a payday loan is not that approval is available within minutes, but that approval is almost guaranteed. After all, when seeking a personal loan with no credit checks, the only information that really matters relates to the income the applicant has.
A payday loan is granted solely on the back of the income due in the next paycheck because the loan is usually repaid in full with a single payment directly from that paycheck. Basically, the loan figure is as much as or less than the paycheck - with interest in the calculations too, of course.
Fast loan approval is fine, and even with terrible bad credit scores it is probable, but the compromise is that a very high interest rate (35%) is charged, and the repayment term is very short (14-30 days). What is more, the available sum is low, with most payday loans limited to $1,500. It means this personal loan option is ideal for emergency repayments, but at a very high cost.
The unemployed can hardly be considered as ideal borrowers by lending firms. But it may be a surprise to learn that some lenders are willing to grant approval to those seeking a loan but with no job to their name. It is not as unwise as is generally believed, so securing a large loan for the unemployed must be considered a major possibility.
Of course, it seems very strange that the unemployed can be considered for a loan at all. With no visible means of repaying the loan, the lender is clearly accepting all of the risk. However, there is a definite method to their madness, with granting approval with no income still managing to increase their profits with defaulting remaining low.
But why would a lender provide an unemployment loan? The answer lies in the whether a leap of faith is considered acceptable or not. After all, there is the potential to make real profits. However, there are some questions that should be asked before making a final decision.
Why Lend To The Unemployed?
There is a common misperception of the unemployed, with traditional lenders suggesting they are too unreliable to borrow money. The fact that there is no reliable source of income supports that believe, but it is possible to get a large loan for the unemployed becomes a potential to earn is recognized.
Basically, even though the applicant has no income now, there is a belief that the borrower will get a job soon. So, granting loan approval with no income is not so big a risk. This removes the risk of defaulting, at least in part, also ensures that the critical bills that the applicant faces can be met
But of course, there are conditions to such loans. For a start, these unemployment loans are not available to the long-term unemployed. The lender is more interested in the recently made unemployed - those who have the biggest chance of bouncing back, so to speak.
What Are The Terms To Seek?
While it is possible to secure a large loan for the unemployed, there are conditions that make this quite expensive. For the most part, however, applicants seem to like the availability of smaller loans. Since there are two repayment terms to consider - long and short - it is generally not difficult to work out which is affordable.
The typical loan for an unemployed applicant is around $1,500, offering just enough finances to deal with a specific financial emergency. The interest charged on these loans will be higher than usual while the term of the repayment schedule is such that there is often pressure to repay the full amount on time.
Getting approval with no income is not too difficult when the sum is small, but for larger loans of perhaps $25,000, approval may be a little more difficult. Affordability is essential, and by extending the repayment term - to perhaps 10 years - the unemployment loan become affordable.
Satisfying the Qualification Standards
Lenders who offer a large loan for the unemployed may seem to be overly generous, but in fact there are strict qualification criteria that must be met before approval can be seriously considered. The criteria are specific.
For example, applicants must have been recently made unemployed, but must also have spent at least 6 months looking for work. There must also be a realistic chance of securing employment in the future.
It is a myth that approval with no income is available with bad credit ignored. In fact, what is true is that lenders will check out the background of applicants, with a good credit history helping to seal the loan approval. Career-orientated applicants can also look forward to larger unemployment loans because they are more likely to restart their careers with well-paying jobs.
For some bad credit borrowers, the chances of getting loan approval are so low that there is a preference to hide their credit history if at all possible. But even for this category of applicant there are loan opportunities, with the possibility of getting a personal loan with no credit checks carried out by the lender.
As with all loan products, there are pros and cons to such a loan option, but there is little doubt that it provides borrowers with a chance to secure approval with bad credit and vital funds to deal with financial and debt problems.
However, it would be inaccurate to describe any personal loan granted after an approval process that does not feature credit checking as the most affordable loan option. There are extra costs and higher interest rates, amongst other compromises, to accept. But the extra expense can be worthwhile.
Advantages Of No Credit Checks
For lenders, granting a personal loan with no credit check carried out means they are willing to accept 100% of the risk. This is a very obvious advantage, with applicants not required to provide any form of collateral in order be approved. And there are other advantages to seeking this kind of loan too.
For one, the fact that past credit issues are overlooked means that for those with a very poor credit rating, the interest rate and other loan terms are generally an improvement on the terms usually offered. Securing approval with bad credit is nothing strange, but for some applicants, the interest charged makes the repayment too expensive.
But perhaps ultimately, the fact is that for those applicants with extremely low credit ratings, there is still a chance to source some loan funds. A personal loan, even an expensive one, provides a chance to rebuild a credit status.
Disadvantages of No Credit Checks
Of course, there is no such thing as a free lunch, so even if the advantages of getting a personal loan with no credit check are considerable, there are compromises that need to be accepted too. Not least is the expense that those with average credit scores have to face.
In order to make approving a loan without carrying out credit checks viable, the lender will charge higher interest rates than normal. These rates are set for everyone, with no adjustment for actual scores. The idea is that the attraction of approval with bad credit will attract those with scores that are extremely low.
However, this means that those who may get a personal loan with slightly better terms must forgo that opportunity. So, someone who might get an APR of 10% elsewhere but has a poor chance of approval must accept 14% in return for near-certain approval.
Qualifying For A Loan
There are no special requirements when it comes to qualifying to apply for a personal loan with no credit check. But there are some limits in terms of the size of the loan that a lender is willing to ignore a credit history for. Usually, the loan sum is relatively low, with maximum amounts of about $10,000.
The basic criteria, however, are the same as for any other loan, with all applicants needing to be over the age of 18, and being either a US citizen or a legal long-term resident. In order to secure approval with bad credit, there is also an obvious need to prove a reliable source of income.
And since funds from an approved personal loan need to be transferred to a bank account, and usually repayments are taken directly from the account, there is a need to have a working deposit account.
The first thought that comes to mind when needing extra money to purchase a car, pay bills or furnish your new home is to apply for a personal loan. Do some research to apply for the one right for you.
You've got to repair your car, or buy a new refrigerator or make payments for college tuition. Or it has always been your dream to renovate your home in a particular style, perhaps to develop an organic farm around your home, or take a cruise to Alaska with your family. For all of these expenses that are major enough to warrant a loan but minor and personal enough not to take a home or business loan, there is a personal loan. This is a short-term loan designed to be a quick-fix payment on sudden expenses that are personal in the sense that they relate to your household and family.
Anyone with a generally good credit history can apply for a personal loan. There are two types. Usually personal loans come in the form of unsecured loans. This means that there is no collateral or security offered. So you don't need to mortgage your house against the loan, for instance. This is useful for someone who does not have unlimited assets. Since this is risky for the lender, the rate of interest is high. And non-repayment of the loan with the agreed interest will usually involve taking recourse to the legal system. On the other hand, there are secured personal loans. As the name suggests, they are offered against an asset like a car or property, or anything else that has a monetary value attached to it. Due to this the loan has a low rate of interest. And in the case of non-payment of the loan amount with interest, the collateral is simply confiscated. The terms of the loan are dictated by the kind of collateral offered. They get easier as the value of the security offered is higher.
If you are looking to get a personal loan, get in touch with your bank or any institution that offers this service. You should shop around a little bit so that you can get the best deal that suits your needs. You should have your eye on the interest rates, the length of term, additional services and the fine print. You could even try to negotiate for a better deal based on your income and collateral in case you choose a secured loan. You will have to fill out the paperwork and offer proof of your residence, work and identity. And finally set up a savings account, if you don't already have one to receive the loan and through which to make your repayments. Once the bank is satisfied with your background, only then will you be approved for the loan.
High street retail banks are facing stronger competition than ever from a diverse range of lending sources, introducers and financial services brands. Comparison sites such as Moneysupermarket and GoCompare have brought more information and access to lenders whom many customers did not know existed, while supermarket chains such as Tesco and Sainsbury's offer loans at very competitive prices compared to their retail bank rivals.
This should mean more consumer choice as these businesses compete for customers, but in reality, it is harder than ever to secure loans since so many lenders have removed the human element from underwriting loans. Has the government's involvement and politicians push for more money to be lentout helped? No, and not even according to MP's own opinions; "A lot of customers feel the decision by their bank not to lend is arbitrary. A 'computer says no' culture," says John Thurso, the Liberal Democrat MP.
So what's the best way to navigate through the maze?
Before going for a loan, there are some government schemes that may be able to help you, so you should check these out first. There are two forms of help you might be eligible to apply for: Local Authority assistance: From April 2013, each local authority is responsible for providing help to its residents who are struggling with an emergency; this could be you not being able to afford to buy food, needing help to stay in your own home or needing help if you have just come out of care, hospital or prison. Sadly, this is not straightforward and will depend on the funding that your local authority has been available. There are no nationwide rules, and each council can arbitrarily choose how much financial help to offer, if any, and who is eligible. National assistance: The next type of help comes in the form of budgeting loans and advances. If you are not receiving benefits, you will not be eligible for this type of help, however, if you are receiving benefits and have no or low savings, then this could be for you.
If you have established that there is no government help available, but you need to borrow money, then you need to establish three things before you head off into the maze:
- How much do you need? (Not how much would you really like, or how much do you think you could spend if you had access to it - how much do you really need)
- How much can you afford to pay back? Is it a short-term cash flow problem you have, with some bills you need to pay quickly, but you will have the money to repay on payday? Or do you need to borrow to perhaps buy a car - if so, work out how much you can afford to pay back from your income each month, after you have deducted all the costs of things that you simply cannot avoid (energy bills, community charge, food and clothing, etc.)
So if you have established that there is no government help available in step 1 and in step 2 you have worked out the size and type of loan you will need; you now need to find a lender who will say yes.
There three options to finding the lender and right loan offer for you:
- go direct to the lender
- pay someone to do it for you
- find someone who will do it for you, for free
If you have a flawless credit history, have minimal borrowings and know exactly which lender has the product you need, then this could be the route for you.
Getting some help
If however you don't have flawless credit (perhaps missed one credit card payment 9 months ago, for example) then many traditional lenders underwriting scorecards will simply turn you down. You may also be turned down if you have existing loans, have been in your job or your home only a short time, or don't appear on the voters' register where you live - all of these are very common reasons for lenders to decline your application. This is where having some help can work very much in your favour.
Loan sourcing sites and brokers have access to many lenders that simply do not exist on the high street - they choose not to have expensive high street office rents and instead source their customers through these loan sites and brokers. You can choose whether to pay a broker to assist with your search, or use a site for free to find out what your options are before successfully obtaining that loan you need.