Why You Should Avoid Personal Loans With No Credit Checks at All Costs

personal loans no credit check

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!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Finance Lender Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
  2. Personal Loans: Fixed rates from 5.49% APR to 14.24% APR (with AutoPay). Variable rates from 5.29% APR to 11.44% APR (with AutoPay). SoFi rate ranges are current as of December 1, 2017 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.29% APR assumes current 1-month LIBOR rate of 1.34% plus 4.20% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 5.99% – 16.24% (5.99% – 16.24% APR) based on applicable terms and presence of a co-applicant. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Benefit: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.
7.39% - 29.99%$1,000 - $50,000Visit Upstart
5.29% - 14.24%1$5,000 - $100,000Visit SoFi
8.00% - 25.00%$5,000 - $35,000Visit Payoff
5.99% - 16.24%2$5,000 - $50,000Visit Citizens
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.25% - 14.24%$2,000 - $50,000Visit Earnest
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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print, understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.