Even with the current economic growth seen in the US over the past decade, almost 40% of Americans would not be able to cover an unexpected expense of $400. This is a great example of the financial instability and insecurity that many Americans live in. To make things even more interesting, almost 17% of Americans can not cover their bills in full every month.
Even for the most prepared and organized individual’s life can strike like lightning, fast and without giving any notice. One of the worst scenarios anyone can imagine is needing to cover expenses for medical reasons and not having the means or access to the funding required. While it is not the rule, most individuals that fall into this category are more propense to having a bad credit score. Many failed to understand early in their life how important it is to take care of your credit score, down the road a clean score can become your best friend in moments of real need.
While the first thing that most lenders will ask before even thinking about giving a loan is your credit score, many firms have decided to go through a different path. Instead of using a traditional model, many companies have changed their structure in order to lend money to individuals with a damaged credit score, or simply doing so without even checking the score at all. This has open a whole division in the market that has benefited the most vulnerable sector of the economy, allowing individuals in need, of a transparent and legal borrowing option.
Almost all the firms offering this type of loans had to change the way they calculate interest rates, typically APRs would be calculated based on the trustworthiness of the individual. With this model, the calculus is based on existing debt, income and working stability.
Eligibility For a Loan
With a traditional borrowing method, the first thing that a bank or a financial institution would do after reviewing your request would be to check and analyze your credit score. Disregarding if they would do a hard or a soft inquiry, your credit score would be the cornerstone for the transaction, and also the determining factor that will approve or deny the request.
Many firms have taken a less traditional way by allowing individuals with a damaged credit score or simply without an existing one to be considered credit materials. It is important to keep in mind that most firms will simply perform their own evaluation of the individual in order to determine how much are they willing to lend and also the conditions for any loan.
While the firms mentioned on this list will not require a credit check as part of their criteria, they have other validations and requirements to be eligible.
Some of the key elements that will be used to determine the eligibility of an individual are:
- Age (18+)
- Working History
- Proven Source of Income
- Bank Account
- Education Level
- No Outstanding Loans
Cost of Borrowing (Interest Rates and Fees)
Any financial institution or firm that is lending money is in the game of making money, not doing a social service. The higher the risk they are taking the higher the yield or interest they are expecting in return. The fact that a company is ignoring your bad credit score or the existence of one will not pass unseen, or without being charged for.
This is one of those situations where you can clearly see how important it is for an individual to take care of their credit score, and also how expensive it can be to live with a damaged or dented score.
|Credit Score||Average Loan APRs|
|Excellent (720-850)||10.3% – 12.5%|
|Good (680-719)||13.5% – 15.5%|
|Average (640-679)||17.8% – 19.9%|
|Poor (300-639)||28.5% – 32.0%|
The table from above is based on average APR for personal loans in 2019, these are the rates for loans with a tenure of fewer than 12 months. While this shows how expensive it is to borrow without a good credit score, it does not reflect that depending on the length of the loan and also the size of it, some firms from this list may charge up to 300% of APR for lending you without checking your score. This is a great example of how preparation and saving can help to avoid the necessity of recurring to this type of borrowing vehicles and products.
Besides dealing with expensive interest rates, most companies will also have incredibly high fees for disbursement, management and also for late payments. Getting a loan might seem like the only way when it comes to overcoming a hard situation, it is imperative to understand if you will have the ability to pay back, otherwise, you will be simply postponing your problems and probably making the situation even worse.
Another important aspect is that you need to be clear and honest with yourself about your ability to pay, especially when it comes to deciding the tenure for the loan. The idea of repaying the loan as soon as possible might be luring, but it is more important to be able to pay back and breath than being suffocated with a high monthly payment. At the end of the day, you should aim for a fee that you are certain you can afford, this will save you money from penalties, fees and will also help you from an emotional standpoint.
Pros and Cons about Loans With “No” Credit Check
- High-Interest Rates: Just like we mentioned above, the fact that the lender is taking a higher risk by lending you money, it means that the return expected is equally higher. From all the products offered by legal and well-rounded institutions, this type of loan has probably one if not the most expensive average APR in the market. Take into consideration that while it can be expensive, it does offer a structure that is unknown by traditional banks, making it a considerably good opportunity and option once you see pass the high-interest rates.
- Low Borrowing Limit: Continue with the whole high-risk theme, most firms will only allow a relatively small amount per individual. It is important to mention that the firm will also take into consideration your income in order to determine how much they will be willing to lend you. On average most individuals will be approved up to $1,500 but it can easily be more or less depending on how much money you make every month and also your working history.
- High Late Payment Fees: This is an aspect where you really have to be careful and avoid spending money unnecessarily. If you ever find yourself in a position where you won’t be able to pay on time, it is always recommended to contact your lender before time. This will help improve the odds of getting an extension or even been forgiven for the late payment. On the other hand, if you don’t inform and simply pay late, you will have to cover high penalties and fees that can easily add up to a percentage of your monthly payment. Another point to mention is that fact that you might not be using your credit score to determine your creditworthiness when you request the loan, but if you default or you are always late with your payments, it will be reflected on your score. If you are requesting this type of loan it is a high probability that your score is already not that great, it is recommended to avoid falling into this problem as it will continue damaging your score even more.
Top 5 Providers of Loans With “No” Credit Check
1. Money Mutual | Cheapest Option (Institutional Lenders)
Money Mutual follows a similar model to names like Prosper, but instead of connecting individuals with other retail investors and lenders, the firm is used to act as a bridge between alternative institutions and retail borrowers. Picture a P2P lending model but your lender is a financial institution instead.
Just like with a traditional P2P structure, your application will be reviewed directly by the end borrower. The borrower will take full responsibility in terms of the model utilized to decide if they want to lend you money or not, this allows individuals to otherwise would have not been approved to gain access to borrowing vehicles.
This might not be the most famous firm in the US, but with more than 2,000,000 active users every week it is definitely not small. If you are currently dealing with a bad hand and you are in need of a fast loan, this firm can help you get up to $2,500 in less than 24 hours.
APR: Fully Variable
Loan Type: Personal Loan
Loan Amount: Upto $2,500
Length: 1 or 5 years
2. Upstart | Best for Individuals with No Credit History
Upstart is not your common financial institution that is interested in taking high-risk lending, instead, it is a firm that has been backed by some of the most important titans in Silicon Valley. Just be analyzing the names of the early investors, it is easy to see how respected and also how important this company has become, not every day you have Mark Cuban and early Google Executives trying to buy a small lending firm.
One important aspect that makes this firm so unique is the fact that rather than simply considering individuals for their credit score, the firm utilizes its own model to determine creditworthiness. This proprietary model is so unique that it takes into consideration working experience, education, GPA, and more, allowing the company to see beyond just a number and a credit category.
Keep in mind that this is a solid firm that will only use a soft inquiry to review your credit score, other aspects will be more relevant to determine if your creditworthy or not. From lending the perspective this firm is a goto for individuals who simply do not have a credit score, and for those with a score that simply was not good enough for traditional institutions.
APR: 7.69% to 36%
Loan Type: Personal Loan
Loan Amount: $1,000 t0 $10,000
Length: 3 or 5 years
3. Credit Loan | Best for Flexibility
The mere act of lending money to an individual without doing a credit check first is simply bizarre to the eyes of most traditional institutions, but within all the lack of credibility, there are firms that are willing to take the risk. Credit Loan acts as a market where borrowers can solicit money and lenders can auction their funding. With this structure, borrowers can assure that they will get the cheapest prices available in the market, at least for someone with their current credit condition.
While Credit Loan is not the only firm following this model, it is one of the overall best markets available to date. What makes the platform so good is the fact that they are known for offering short term borrowing at a reasonable price, and on the other hand they’ve become famous in the market for lending to individuals that have been denied and rejected by many other firms.
If you been trying to get a loan but have been rejected before, I would recommend you try using CreditLoan. This is a very straightforward structure that is backed by a stable and mature firm, in a market that is very corrupt and full of sketchy names it is always good to see firms standing straight.
APR: Will depend on the lender (Variable)
Loan Type: Personal Loan
Loan Amount: $250 to $5,000
Length: 1 month to 2 years
4. Prosper | Best for P2P Borrowing
When traditional lenders are not an option, there are not many alternatives where an individual can safely borrow money without exposing to sketchy contracts or ilegal sources. Over the past decade once sector in particular has risen with the help of fintech, it is the P2P lending business.
P2P lending allows individuals who have an excess of cash to invest in lending money, giving them the ability to act as banks. With this model, all transactions and contracts are usually managed by a third party firm like Prosper. Instead of simply offering liquidity, the firm acts as a market where individuals who are interested in lending can choose from all the individuals that want to borrow.
This is a model that has become the go-to option for individuals with a damaged credit score, mainly because it allows them the opportunity of presenting their case and their situation. Instead of dealing with an institution that has established rules, ratios, and parameters to lend money, prosper allows for an application that is more personalized. This help improves the odds of being able to borrow, even without a credit check or without a credit score at all.
APR: 6.95% to 35.99%
Loan Type: Personal
Loan Amount: $2,000 t0 $40,000
Length: 36 to 60 months
Life is full of curveballs, and they usually hit when we are expecting them the least. It is important to always have a backup plan to cover this type of emergencies when they occur, they might not happen as much but when they do it is better to be ready than having to fall or compromise for a way out. Not being prepared will always end up being considerably more expensive.
With this type of loans, individuals should be aware than the mere fact that a lender is willing you let you borrow money even though they know your credit score is not good, opens a whole new narrative where your luck will depend on the institution you are trusting. More than simply talking about the overall positives or negatives about this type of borrowing vehicle, individuals should be aware that they must perform a full review before committing to one provider. This is a market full of sharks who knows that individuals looking for these products are vulnerable and in need.
Planning in advance and having an emergency fund will help you be ready and to overcome this type of situations when they appear, they will also keep you away from lending predators. But in a scenario where planning was not enough or simply was not existing, it is always heartwarming to know that there are still some firms and providers that are transparent and trustworthy. Keep in mind that you don’t want the cheapest option, but the one that has proven to be the most transparent and also the most flexible.
And just like I’ve mentioned before, don’t forget that your credit score can be improved. Use this situation to start working on your score, be responsible with your payments and try to get out of the loan before if possible. By working on your score you will be working on your future, it might not be the last time that a situation like this takes place, but it can be the last time that you need to use these expensive borrowing vehicles.
Most firms will review your credit score in an effort to analyze your whole profile, it will not be used as a determinant factor for the approval. In most scenarios, a soft inquiry will be the only review they will make for your loan application. It is always recommended to ask these questions directly to the lender of your choice in order to determine their view and structure as it will vary from institution to institution.
On average most firms will create a credit profile based on your work history, your income and also your education. While changing works should not be a show stopper, certain firms expect at least 6 months of constant work in order to approve loans. In most cases, you can explain the situation, prove that it is a new job, a better wage or anything related to making your case. At the end of the day, it is going to depend directly on the person reviewing your application for them to determine if it going to affect or not.
Since most firms transfer their application processes online, the entire process can be done automatically and profiles can be reviewed by algorithms. This allows for a lightning-fast process which ultimately benefits the borrower. Instead of having to wait for weeks for your loan to be approved and disbursed, modern firms will approve the same day and deposit the money the same day or the next at the latest. It is important to mention that while applications can be sent online, in most cases there is a double check made by a person in the firm. This implies that depending on the moment of the day or the time that the application was sent, it can have an impact on the overall approval process and its timing.
While this will depend from firm to firm, in most cases early payments will not incur in any sort of penalty or extra charges. It is always recommended for you to ask and review all these details before committing to one provider.
Keep in mind that there are many other alternatives that may allow and individual to borrow money in case of an emergency, but there is a pretty common problem related to this type of providers. One of the major concerns and complaints is the fact that some of these companies operate without a license or a due structure. Another aspect is that it’s been publicly known for some of these firms to take advantage of their clients, to the point of churning them for fees. Imagine having to deal with an aggressive collector that simply says that you owe them more in fees or penalties simply because they can and because of a sketchy and probably illegitimate contract.