credit check
  • April 23, 2022
  • admin

Whether you are to borrow a small amount of money or a large amount, borrowing can be daunting. Regardless of your needs, you are to undergo the same procedure. Online lending has made borrowing very easy.

With the help of around-the-clock service, you can fill up the application form any time, and you will get money credited to your account. Although the entire process does not take too much time, it involves a credit check.

It is a process when a lender asks credit reference agencies for your credit file to know your credit score that tells your financial behaviour. Although it is a part of the lending process, most of the people flinch from the credit check. Here is why.

The impact of a credit check

Your credit score can be excellent, good, perfect, bad or very poor. A higher credit rating shows a good previous payment record, so you will likely get money at lower interest rates. When a lender makes a credit run, search footprints, also known as hard inquiries, will show up on your credit record.

These footprints will pull five credit points, making it lower. If you immediately apply for a new loan, you will likely end up getting it at a higher interest rate. When you need money for general expenses, you can put them off.

However, if you come up with an emergency, you will likely need an immediate injection of cash. As your credit is already not up to scratch, a new application will pull your credit score further. As a result, you will have difficulty borrowing money at attractive interest rates.

If you need emergency funds and do not want your credit history to come in the way, you can opt for a no credit check loan. What is a no credit loan? A no credit check loan is one that does not involve a hard credit check. It is not a financial product like a personal loan. It is rather a small loan that does not require a credit check.

Since a lender will not run hard inquiries, your credit score will not go down. Does that mean the lender will sign off straightaway? No, it is not like that. Your lender will run a soft credit check. Soft inquiries do not leave footprints on your credit file; hence, no lender can see those inquiries.

This is how your credit score remains intact, and the lender will get to know about your financial position. However, you must need to have a strong repaying capacity as these loans carry higher interest rates. It is to compensate for the risk of the lender.

Types of no credit check loans

If you want to apply for a loan but have a bad credit rating, you can consider looking for a no credit check loan. This blog discusses the types of loans that can be offered without a credit check.

Payday loans

Payday loans are small loans that do not require a credit check. You just have to fill in the application form, and the money will be transferred to your account as immediately as possible. These loans have very small repayment terms, normally on or around your next payday.

Most of the time, it is not more than a period of two weeks. APR of these loans can be outrageously high, so make sure you can pay back the money on time. It is suggested that you do proper research because each payday lender charges different interest rates. Compare interest rates and use the online calculator to know how much you will be paying as monthly interest.

Guaranteed loans for the unemployed

The unemployed can also apply for no credit check loans. However, you do not need to seek these loans if you have at least a fair credit rating. If you have lost your job and now living on unemployment benefits and side gigs, a lender may allow you to take out guaranteed loans for the unemployed.

Note that these loans are not like payday loans that do not have a feature of a credit check. Lenders generally make hard inquiries at the time of approving the application for guaranteed unemployed loans.

If you have already a less-than-perfect credit rating, you do not want hard inquiries to be shown up in your credit record. You will have to tell me that you do not want a credit check. Since the lender will make no credit check, interest rates will be higher than standard unemployed loans. At the time of applying for these loans, make sure you will not struggle to pay them back on the due date.

Tenant loans

Unsecured tenant loans are also a part of no credit check loans. If you are a tenant and your credit history is not stellar, you can ask a lender for tenant loans with no credit check.

The lender will only run a soft credit check. Since your previous payment history will not be disclosed, it increases the risk on the part of the lender. Therefore, you will be levied high-interest rates to compensate for it.  

Very bad credit loans

Very bad credit loans no guarantor no broker direct lender also come under the category of no credit check loans. Those borrowers have a very poor credit history that had been issued a CCJ.

If you want to apply for these loans, the CCJ must have been settled. These loans are also known as CCJ loans. The interest rates of these loans are very high. You must be careful of your repaying capacity.

Pawnshop loans

Pawnshop loans are traditional loans. They seem very appealing to borrowers who do not want a hard credit check. Under this system, you borrow a certain amount of money in exchange for a valuable asset – known as collateral. You will be given 30 to 60 days to pay back the loan.

These loans come with hefty fees, and if you fail to pay back the debt, you will lose your collateral. Pawnshop loans are secured loans. It is a good thing that they do not require a credit check, so you do not need to be afraid of losing your credit score.

However, these loans also do not help you build a credit rating. Pawnshops do not lend as much money as online lenders. The lending money can be up between £50 and £200, while online lenders can give you up to £1,000 as no credit check loans. If you need a large amount of money, pawnshop loans will not work for you.

Credit builder loans

You will not have a credit report if you have never borrowed any money. If you want to build credit in order to take advantage of lower interest rates for a mortgage and an auto loan, you will have to take out a credit builder loan. As you do not have a credit report, there is no risk of losing credit points.

Having no credit history is also perceived as a riskier profile, and that is why high-interest rates are charged. However, the good thing is that you will pay down these loans in monthly instalments. If you successfully pay back the whole of the debt, your credit rating will build.

The bottom line

No credit check loan is not an individual financial product. It is rather a term that covers various small loans. These loans carry higher interest rates because of the high default risk.

If you still want to apply for these loans, you should scrutinise your repaying capacity. Otherwise, you will end up rolling over the loan and eventually fall into a debt trap.

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