If you’ve ever found yourself in a financial bind and started researching alternatives for quick access to cash, then you probably already know that it is possible to get a loan even when your credit score is already bad. Of course, your options are more limited with poor credit scores, but it certainly doesn’t mean that you need to kiss the idea of borrowing money goodbye. Often enough, those whose credit ratings are poor are those most in need of access to cash, in order to tide themselves over, secure their livelihood, or cover emergency expenses. In such cases, provided you proceed with caution, you can even consider a no credit check loan – but are these ever a good idea, or are they simply traps to dig your financial hole that much deeper? In the following, we closely scrutinize some of the most popular types of loans that come with no credit check whatsoever.
First things first: how bad is your credit, really?
Before diving into the world of no credit check loans head first, it’s worth considering the fact that your credit score report is wrong. It does happen ever so often, leading lenders to turn down loan applications that you may have otherwise been eligible for. So, before you do anything else, check out websites that offer free credit reports – there are plenty of legitimate ones out there. You can also consider purchasing reports from all three credit scoring institutions, and then comparing all three to check for inaccuracies. Once you’ve made sure this aspect of getting a loan is out of the way – and find that your credit score is still looking unimpressive – you can start your research on getting a loan with a poor credit history.
Loans from credit unions
Some credit unions will award loans to individuals with bad credit histories, simply because, in the past years, these institutions have relaxed their rules, in order to attract an influx of cash. Nowadays, you don’t necessarily have to be eligible in order to become a credit union member: some will allow membership based on area of residence, or on the criterion of belonging to a particular not-for-profit organization. It’s also far less frustrating to apply for a loan from a credit union rather than a bank, as their policy is to analyze an applicant’s entire financial history and profile, rather than just a credit score. The process of applying also involves dealing directly with a human being, not just forms and red tape, which might help your case in the long run.
Buy here pay here loans
If you’re looking to buy a car, but have found that your FICO score won’t allow it, perhaps you should consider purchasing a vehicle through a Buy-here-pay-here dealer. They don’t check for credit scores and take all lending decisions on site, in order to cater to as many clients as they can. Most of them guide themselves on the principle of “your income is your credit score”. In other words, if you have a job or any other steady source of income, you’re good to go. If you’re interested in BHPH, you can read an in-depth article about it here, but here are some other aspects of such no-credit car loans you should be aware of:
- Back payments on such loans are made directly to the dealer, not a bank or any other type of financial institutions, since the dealer is the entity that granted you the loan.
- In most cases, such loans are paid back in cash, on a weekly basis.
- Typically, the APR is around 20% on such loans, but most lenders will focus on how much money you’ve managed to pay back out of the entire loan, not how much of your interest is covered. They understand that interest rate changes happen too often to account for.
- Since these are, essentially, no-credit check loans, you also need to take into account that the lenders regard them as high risk. As such, in the very beginning, you will need to make a large down payment with your dealer of choice. That down payment will cover for a fraction of the dealer’s investment into the vehicle.
- Although you don’t need to go through a credit check, you will still need to make proof of your income. Generally, most BHPH dealers will ask that you prove to be making at least $1,500 in gross income, pre-tax.
Quick cash loans
You may be familiar with this type of loan under the name of payday loans, or cash advances. Now, opinions regarding these loans are split, as some consider them far too risky to ever venture into. And, indeed, there are many lenders out there who practice unorthodox approaches to lending: some will slap you with incredibly high APRs, while others will withhold important information about additional fees associated with the loan. However, by and large, payday loans and quick cash personal loans are nowhere near the wild jungle some financial experts make them out to be. These days, this particular segment of the credit market is regulated just like any other one – in case you’re misfortunate enough to stumble upon a bad lender, you can always report them to the Credit Bureau.
In fact, it’s probably best to start out by running a background check of any such financial institution before borrowing money from them. Previous complaints with the Bureau are public information and a particularly hefty record of such issues will tip you off that you need to steer clear of such a lender. At the same time, in 2014 there exist plenty of decent, trustworthy lenders that you may want to look into. Some websites even offer reviews of such financial institutions currently active on the market, thus streamlining the selection process and helping you make the choice with more ease and less time spent researching on your own. And while the high risks and high APRs that such loans often entail, they can be a good last resort kind of solution, provided you have the resources to pay back the loan in full and on time.