Getting a loan can be a stressful matter, with question marks over approval chances when the credit history of the applicant is bad. But that is not to say getting necessary funds is impossible. It is possible to apply for a personal loan with no credit check, thereby vastly improving the chances of gaining approval.
For many people, the fear of rejection prevents them from ever applying for a loan, even if there is a very strong need for the funds. But with the chances of loan approval despite bad credit improved so much, the likelihood of getting out of a serious financial quandary are also greatly improved.
However, there are some points that need to be considered before making the application. Not least is the fact that these personal loans can often come at a high price, with high interest rates and some very short repayment schedules. Therefore, careful budgeting is advised.
Credit Checks Explained
A credit check is exactly as it sounds. Lenders will check out the credit history of applicants so as to assess just how likely he or she is to repay their loan. By offering personal loans with no credit checks, lenders are putting themselves at risk since they are not establishing whether or not the applicant has a history of repaying their loans.
The good news for borrowers is that it becomes easier to get loan approval despite bad credit, with the facts that would otherwise be enough to ensure a bank turns the application down no longer part of the equation. What is more, the time taken to check a credit history is not lost, so approval can be received faster.
The down side is that interest rates are typically much higher. The convenience of accessing a personal loan so assuredly is balanced off by the need of the lender to cover their potential losses.
Small Loans Only
The second issue to consider is the size of the loan that is available. When applying for personal loans with no credit checks, the lenders is effectively accepting the risk of not getting their money back, so it is unwise to expect large sums to be granted. Most lenders set firm limits of $1,500, though in some cases the limit can stretch to $3,000.
The reason is that normally the loan is awarded against the income of the applicant, so granting loan approval despite bad credit is a major leap of faith on the part of the lender. Reducing the size of the potential loss is in their interest, and given that repayment is made in full, directly from a salary check, and within just 30 days, there is considerable pressure on borrowers.
When seeking a personal loan of between $1,500 and $3,000, a longer term can be secured, with payments stretching over 90 or 120 days. This eases the pressure a little, but the risk of losing money is still very real for lenders.
Collateral for Larger Sums
One way to secure larger personal loans with no credit checks is to provide some collateral as security. When funds of $10,000 or $20,000 are needed, lenders will accept an item worth that amount as security, and give the loan application the green light. This works because the lender knows that no matter what happens, they have something to compensate them.