If you need some quick cash, you might consider a “no credit check” personal loan. Having access to personal loans with no credit check required can seem like an attractive option, especially if your credit isn’t great or you’ve been rejected for other types of loans in the past.
But is getting cash this way really a good idea? Probably not — here’s why.
Credit check vs. no credit check
When you borrow money, the lender typically checks your credit before approving you. This informs lenders about your creditworthiness — in other words, how responsible you are with making payments on time.
“A credit check is an important part of any lender’s underwriting process,” said Ian Atkins, an analyst at Fit Small Business. “It will help them determine a fair price for your loan based on key indicators of likely default.”
If you have good credit, you’ll likely get competitive interest rates. If you don’t, your interest rates could be sky-high. Worse yet, you might not even be approved for a personal loan.
That’s where a no credit check personal loan comes in. They’re appealing because your credit won’t get in the way of you getting some much-needed cash.
“Personal loans that have no credit check may seem like a wonderful idea, especially for people who have an imperfect credit history,” said financial coach Maggie Germano. “Unfortunately, those offering personal loans with no credit check are not looking out for a borrower’s best interest. In fact, they use predatory practices that harm a borrower in the long run.”
For people who have extenuating circumstances with less-than-stellar credit, personal loans with no credit check required may be one of the few options available — but that doesn’t mean they’re a good idea.
How no credit check personal loans work
Online personal loans with no credit check required are available to consumers everywhere. You might be able to borrow a couple hundred to several thousand dollars. The loan amount and repayment terms vary by state.
If you fill out an application, you’ll probably get approved instantly. Seems great, right? You can get quick cash transferred to your bank account when you need it.
But don’t let the easy approval fool you. These no credit check personal loans can be a financial trap.
Personal loans with no credit check are a bad idea
Personal loans that don’t have a credit check typically have exorbitant interest rates and high fees.
Since these companies don’t use your credit to determine if you are worthy of a loan, they take on more risk when lending money. Because of that, they charge out-of-this-world interest rates.
How much exactly? It depends on the company and the repayment terms, but if you calculate the fee as an annual percentage rate, it could turn out to be several hundred percent. In fact, many personal loans with no credit check come with a 200% to 400% APR.
“Without running credit checks, a lender has to make so much money off their loans that they can cover a higher potential for loss,” said Atkins.
You might take out a small loan to cover an emergency expense like a car repair, but if you can’t pay it back on time you could end up paying a lot more.
“If you take out one of these loans and are unable to pay them back quickly, you will end up owing double or triple of what you borrowed in the first place,” said Germano.
Alternatives to personal loans with no credit check
If you’re in need of cash ASAP, what else can you do? You might consider applying for a small loan from a credit union. These should offer low interest rates and fair repayment terms. But you will still need decent credit for approval.
You can also check out a reputable personal loan lender that checks your credit before approving you. Though taking out a personal loan for emergencies is not ideal, using a lender that does have a credit check can be a safer bet.
For example, online personal loan lender Avant offers personal loans that can range from 9.95% to 35.99%. If you have poor credit you’ll likely be on the higher end of the spectrum, but that’s still preferable to having an APR in the triple digits.
The safest bet is to use cash you have on hand. If your funds are limited, start saving for an emergency fund. That cushion could help you avoid predatory lenders and you won’t need to take out a loan just to make ends meet.
“Avoid no credit check personal loans and payday loans at all costs,” said Germano. If you’re looking to get quick cash to pay off other debt, Germano suggested looking into debt counseling before taking on additional loans that aren’t in your best interest.
Take out a loan for the right reasons
You don’t want to put out one fire and create another one. Make sure you’re taking out a loan for the right reasons. If it is truly a need, find a reputable lender that can offer reasonable terms.
Is your credit too poor to get a legitimate loan? Follow these tips to safely get a personal loan with bad credit.
Interested in a personal loan?
Here are the top personal loan lenders of 2018!| Lender | Rates (APR) | Loan Amount | |
|---|---|---|---|
1 Includes AutoPay discount. Important Disclosures for SoFi. SoFi Disclosures
2 Important Disclosures for Citizens Bank. Citizens Bank Disclosures
* Important Disclosures for Upgrade Bank. Upgrade Bank Disclosures
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 | 7.73% – 29.99% | $1,000 - $50,000 | Check rate nowon SLH's secure site |
 | 6.28% – 15.62%1 | $5,000 - $100,000 | Check rate nowon SLH's secure site |
 | 6.87% – 35.97%* | $1,000 - $50,000 | Visit Upgrade |
 | 8.00% – 25.00% | $5,000 - $35,000 | Check rate nowon SLH's secure site |
 | 4.99% – 29.99% | $10,000 - $35,000 | Visit FreedomPlus |
 | 5.99% – 18.99%2 | $5,000 - $50,000 | Visit Citizens |
 | 15.49% – 34.49% | $2,000 - $25,000 | Visit LendingPoint |
 | 5.99% – 35.89% | $1,000 - $40,000 | Visit LendingClub |
 | 5.49% – 18.24% | $5,000 - $75,000 | Visit Earnest |
 | 9.95% – 35.99% | $2,000 - $35,000 | Visit Avant |