How Is It Possible To Get A No Credit Check Loan?
Are no credit check loans possible? They are, indeed - but how? That is the question we are going to answer today, to make sure everyone knows exactly how things work with this type of lending - what are the benefits, what are the drawbacks, how it's even possible, and of course, what's the catch?
Why Would a Lender Offer Money With No Credit Check?
One of the most common questions people have regarding no credit check loans is why - and how - a lender can, or would just offer you money with no credit check to speak of? After all, isn't that a super important step in verifying that you can pay back the loan? How else can they assess and secure the money you are borrowing? Well, if you thought a lender gives you the money based on trust, out of the goodness of their heart, you would be wrong. There are other background checks they carry out, without needing to look into your credit, specifically.
1. Affordability Check
Any lending company worth their salt will perform an affordability check, regardless of whether or not they've run a credit check or of how good your rating is. The Money Advice Service has a mortgage affordability calculator available, for example, so you can see what that looks like. A good rule of thumb is not to make deals with any lender who will not perform this check, as they do not have your best interest in mind. You should, of course, also make sure you can afford a loan, but it is also their responsibility. This check will also be performed when you go for no credit check loans, so rest assured that they've got it covered and aren't putting themselves at risk.
2. ID Check
In addition to the affordability check, you will also undergo an ID check of sorts. This is like a background check looking at your identity, if you are genuinely who you say you are, where you live, how long you've been in the country, etc. Think of it as kind of a DBS check. This, again, does not require your credit score or anything of that sort, so it's still not taken into consideration during your assessment. This does, however, help the lender gain a better understanding of your identity and reliability.
3. Employment Check
Finally, they will do an employment check, where they will verify your place of employment, your income, if you are likely to continue to receive income for the duration of your loan repayment, etc. This ties into the affordability check and it is a very important step in confirming that you can, indeed, be trusted to reliably repay the loan, even without checking your credit history and rating.
The Common Issues With No Credit Check Loans
Clearly, there are many advantages to be enjoyed with no credit check loans, but there are also issues and risks you have to take into consideration. In the interest of being 100% informed, let's take a look at the risks that come with this type of lending, as well as the benefits.
The lender might be unreliable
One issue with payday loans with no credit check is that the lending company may not be as trustworthy as it appears. Be sure to look into the company's history, as well as reviews to make sure you are not falling prey to a loan shark. In addition, be vigilant when looking over the documentation and check for surprise clauses, hidden fees, and undisclosed charges.
You may encounter affordability issues
The other problem is the limitation caused by the terms of the loan itself. You see, the lack of credit check means they offer you less money, on a shorter repayment term, and with a higher interest rate, which we will talk more about in a following section. That can make things difficult when it comes time to pay the regular loan instalments.
Your credit score does not matter
The most obvious benefit is the fact that you can get a loan without having your credit score factor into the assessment. It doesn't matter if it's not up to snuff, because you are able to have other checks done instead, in order to give the lender peace of mind and some sort of security regarding your ability to repay.
You can repay in instalments
There are types of payday loans that you need to pay in full, typically within a month of borrowing the money - these are the traditional loans until payday, hence the name. Payday loans with no credit check, however, are available to be repaid in regular instalments over a longer period, offering you some flexibility and affordability.
What's The Catch?
But since nothing is all positive and perfect loans don't exist, there is a catch - the interest rate is typically quite high. With an APR that can even reach 1500%, this can be a very expensive loan to repay, depending on how much you get and how long it takes you to pay it back. If you borrow a higher amount that you repay over a year or longer, you are in for one heck of an interest charge, that you will be feeling fully over the course of your repayment instalments every month.
In conclusion, yes, it is possible to get no credit check loans, and the explanation behind them proves to be very simple. Poor credit doesn't mean you can't borrow money, which is why options like this exist on the market. You just have to be well aware of the risks and benefit and know that, like all things that seem too good to be true, there is a catch that you need to factor in.