App version: 0.1.0

No Credit Check Personal Loans: Risks & How to Apply

No Credit Check Personal Loans: Risks & How to Apply; No-credit-check loans are offered loans that do not need to check your credit, but these loans can hold a lot of risk. Find out more with this guide!
Lauren Ward
Lauren WardUpdated April 21, 2023
Share this article:
Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
If you have bad credit or no credit at all, you may run into difficulty when you apply for a personal loan. Some lenders advertise no-credit-check loans, with supposedly easier approval standards. However, there’s a risk involved with this type of financing.If you opt for one of these loans, you’ll likely discover high interest rates and fees. Potentially, you may also be asked for collateral to secure a personal loan with no credit check, too.It’s important to understand what to watch out for if you’re considering a no-credit-check personal loan and what kind of alternatives you might explore. 

Is it Possible to Get a Loan with No Credit?

Your credit is an important part of any loan application. If you don’t have any credit history established or if you have bad credit, then you’ll probably have some difficulty finding a personal loan the next time you need extra money.However, most likely you can get a loan. There are some lenders that are willing to work with borrowers with no credit or poor credit, but typically there are risks involved. Take the time to review multiple options so that you don’t end up with a loan that has over-the-top interest rates and fees. Getting online personal loans with no credit or bad credit is possible.

What Are Personal Loans with No Credit Check?

A personal loan with no credit check is an installment loan from a lender who doesn’t necessarily look at your credit history as part of the application process. The lender will likely consider other factors, like your income and perhaps any personal assets you could use as collateral.Once you sign the loan agreement, you’ll receive a lump sum of the loan funds and then start making payments on a regular basis. Oftentimes, personal loans with no credit check come in smaller loan amounts and require more frequent payments. This could be weekly or even daily, depending on the lender’s requirements.The lender might also require that payments be automatically deducted from your bank account on the due date, rather than letting you make manual payments. Depending on the type of no-credit loan, your on-time payments may or may not be reported to the credit bureaus. 

Why Is It Difficult to Get a Loan with No Credit?

Your credit history is an indicator of how well you’re able and willing to repay your debts, which is why most lenders use it to determine your loan eligibility and interest rate. If you have no credit history, a lender has no way of telling whether you’re likely to make your payments on time.And if you have bad credit, it means that you either have a lot of debt to contend with already or have a history of missing payments (or both). Lenders view both situations as a risk of losing the money they lend you.Credit monitoring can be a helpful way to figure out where your credit stands right now and what factors are giving you a low score. Credit monitoring companies can alert you to changes in your credit and may keep you posted on your credit score. Some charge for the service and some don’t, and what they offer varies, so be sure you know what you’re signing up for.

How to Get a Loan Without a Credit Check

The first step is to check your credit score. This gives you an idea of how good or bad your credit really is.Personal credit scores typically range from 300 to 850. The FICO® Score is one of the most common scores used, and as of 2022, the average American has a FICO Score of 714. A credit score below 550 is typically considered “poor.” Find out your score so you know what types of loans may be available to you.There are several different types of loans that don’t check credit, as detailed in the next section. Each one has its own application process, but there are some similarities you’re likely to find. Most require a U.S. bank account, both for depositing the loan funds and for automatic withdrawal of payments.You may also need to provide income verification documents like paystubs and federal tax returns, though some nonbank financial institutions may offer personal loans without income verification. Some lenders also consider your education as part of its underwriting process. That may be especially likely if you’re a recent college graduate with a limited credit history.

What Are the Easiest Loans to Get with Bad or No Credit?

Here are some options for no-credit-check loans. Each comes with its own risks, however, so be clear on your loan terms before moving forward:

Online No-Credit-Check Loans

Some private lenders offer online no-credit-check loans for relatively small amounts with scheduled installment payments. Rates tend to be higher, but the terms are typically more favorable than what you’ll find with a payday loan or title loan.

Payday Loans

Payday loans can be one of the riskiest types of financing out there. APRs can reach nearly 400% — and even more in some states. The full loan balance is typically due in just a few weeks. If you can’t make the payment, you can roll over the loan with extra fees. Unfortunately, this makes it easy for borrowers to get trapped in an expensive debt cycle.

Car Title Loans

A title loan relies on your car ownership rather than your credit. You generally must own your car in full in order to apply. However, you have to give your car title to the lender, who can repossess and sell your vehicle if you default on the loan.

Risks of Loans with No Credit Checks

There are multiple risks associated with no-credit-check loans. First, both the interest rates and fees tend to be extremely high. It’s also easy to get caught up in a cycle of debt if the loan offers extensions. Plus, if you have no credit or poor credit, these loans in some cases may not help you build credit. Even if you make all of your payments on time, some no-credit-check loans aren’t reported to the credit bureaus.Finally, companies advertising no-credit-check loans may not all be reputable. In particular, avoid being scammed by supposed loans that require you to pay a fee in advance — they’re not legitimate.

Alternatives to No-Credit-Check Loans

A high-risk no-credit loan should be a last resort. Consider these alternatives before applying:

Credit Builder Loans

With a credit builder loan, you’ll make payments on the loan into a savings account. As you do, the lender reports your payments to the credit bureaus. You receive the loan funds once you pay off the entire loan balance, including interest.

Online Bad Credit Loans

Small personal loans online are available specifically for individuals with bad credit. Interest rates and other fees are high, making them an expensive form of borrowing. If you qualify, however, the funds are usually deposited very quickly. 

Cosigner Loans

Add a cosigner to your loan application to make up for your lacking credit history. The lender will consider the cosigner’s credit history to help you qualify. But if you miss payments on your personal loan with a cosigner, that person’s credit score may also drop. There’s definitely a risk of causing damage to your cosigner’s finances and hurting your relationship as well.

How to Establish Credit When You Have No Credit History

There are a few different ways to build your credit from scratch. Here are some easy ones almost anyone can try:

Get a Secured Credit Card

A secured credit card is similar to a credit builder loan. With credit builder credit cards, you’ll make a deposit that is typically equal to your credit limit. You can then make charges on your credit card and make payments. As you pay off your balance, the creditor reports your payments to the credit bureaus. After a period of time, you may upgrade to a normal credit card and get your security deposit back.

Report Your Rent Payments

The three major credit bureaus may incorporate rental data into your credit report if they receive the information. Many property management companies and landlords offer this service through a third-party company, although there’s often a fee involved.

Open a Retail Card

A store credit card only lets you make purchases at that retailer. But their credit requirements are minimal. Expect to pay a high interest rate if you don’t have much credit established. By making a small purchase and paying off your balance in full every month, you’ll build your credit without having to pay a lot for it.

The Takeaway

It’s usually possible to get a no-credit-check personal loan, but it may not be an ideal option for everyone. Carefully review your loan offer to understand the cost and repayment terms. And when you can, try to save even a little money to use during any future shortfalls.If you’re looking for online personal loans, Lantern by SoFi can help. You can complete a simple form and get loan offers from multiple lenders in our network. This makes it simple to compare offers and choose one that’s right for you.Compare personal loan offers with Lantern.

Frequently Asked Questions

How can you get a personal loan with no credit check?
How can I get a loan with no credit and no cosigner?
What is the minimum credit score for a loan?

About the Author

Lauren Ward

Lauren Ward

Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
Share this article: