Imagine you’re in the market for a home. You probably want to get pre-approved for a loan so you know how much a lender is willing to offer you and at what rate before your start searching for the property of your dreams.
With pre-approval in place, you know what your spending limit is and when you make an offer on that perfect home, you know it won’t fall through or get bought out from under you while you wait for loan approval. Of course, as a responsible buyer, you’ll want to comparison shop, and this means a lot of banks could check your credit, putting a dent in your credit score.
Now suppose an emergency arises, like your car breaks down and needs pricey repairs or you suffer a slip and fall accident or food poisoning and find yourself in the emergency room. You’ll need cash to cover these unexpected costs, but you can’t afford to use the money you set aside for the down payment on your home, and you don’t want another credit check to ding your score and compromise your ability to get a home loan.
A loan could be the right solution, but only if you choose the right one, and this is a situation where a no credit check loan could solve your problems. What is a no credit check loan? Who can use it and why is it preferable to other loan types? Here are a few things to consider when trying to decide if a no credit check loan is the right choice for your needs.
What is a No Credit Check Personal Loan?
To start, a personal loan is one that you take for a personal need, which could be almost anything. Some people take out personal loans to fix a car, pay medical bills, take a vacation, or consolidate credit card debt at a lower interest rate, just for example. Some use personal loans to improve their credit score by building a history of on-time payments.
As the name implies, a no credit check loan is one that requires no credit check for approval. This means that no credit inquiry will appear on your credit report, and typically does not inquire with main credit rating bureaus. It will not affect your credit rating as a hard credit check might, and you won’t have to wait for approval based on your credit score.
No credit check loans aren’t just for those trying to avoid impacting their credit score, though. They can also be helpful for people who are suffering with poor credit. Lenders that insist on running a credit check may not grant loan approval, even for a small personal loan, if you have bad credit. Or they might offer prohibitive terms. On top of that, you could get dinged on your credit report, making your poor credit even worse.
With a no credit check loan, you don’t have to wait through approvals only to be told you don’t qualify, and there will be no record of a credit check to damage your credit report. There is a trade-off, however. No credit check loans may feature fees and higher than average interest rates, but often you can avoid them by paying off your loan in a timely manner. You just have to understand your contract and make sure you have your ducks in a row to pay back the loan.
In some cases, collateral may be required in exchange for a no credit check loan. You may be asked to offer your car title or other items of value. This is called a secured loan because the debt is ensured to be paid, either through your payments or by keeping the item you hand over as collateral. You can also find unsecured no credit check loans if you have no collateral to offer.
Who is a Good Candidate?
Anyone can be a good candidate for a no credit check loan. Typically, this type of loan is preferable for those with poor credit because it’s so difficult to obtain other loan types. It’s also great for those with no credit history to speak of. If you’re just starting out and you find you need more cash than you have on hand, it doesn’t matter that you have no credit built yet. If, on the other hand, you already have a stellar credit rating, you can probably get better terms with a standard personal loan.
That said, no credit check loans are also great for people in emergency circumstances who may not have time to wait through comparison shopping and credit checks. If you need a quick loan to fix your car, repair a leaky pipe in your home, or address another pressing need, avoiding credit checks will certainly speed the process.
It’s also a great option for those who are trying to limit the number of credit checks hitting their credit report. As noted above, house hunters seeking the best rates on a home loan might not want other credit checks on their report, potentially lowering their score.
What Will it Do to Your Credit Score?
This cannot be reiterated enough – a no credit check loan is the only type that will not affect your credit score before you even accept it, because there is no credit check. Like any loan, it can have an impact if you’re late or you miss payments, so just make sure you can manage the repayment schedule before you sign on the dotted line.
Benefits of a No Credit Check Loan
There are two main benefits with a no credit check loan. First, they are fast and easy to obtain. When you’re in an emergency situation and you need money now, you won’t have to wait through lengthy approvals and haggle over terms to get this type of personal loan.
Second, your credit doesn’t play a role in your ability to get the loan. It doesn’t matter if you have poor credit or no credit, you’re going to be eligible because your credit score isn’t a factor, and taking out this loan won’t automatically mess with your credit score.
When to Choose This Type of Personal Loan
It’s not always easy to determine when a no credit check loan is the right choice. You’ll have to assess your options and weigh the pros and cons. However, if you have an immediate need, you’re dealing with poor or no credit, or you don’t want credit checks lowering your credit score, a no credit check loan could be a viable solution.