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There is a common belief that it becomes impossible for those of us with really terrible credit scores to secure loans. But in fact, with the increase in options available from specialist lenders online, it is possible to get some small personal loans without a credit check.
It can be a big risk for lenders to give loans without checking the credit history of the applicant – and that is definitely true. As a result, there are some compromises that applicants need to make in order to get approved despite bad credit.
But what are the specific conditions the applicant needs to accept while applying for this type of personal loan? And, how can a lender approve so confidently when the loan is clearly at a great risk?
No Credit Check: Foolish or Wise?
Any lender that accepts the risk of taking on bad credit borrowers without question has already calculated their chances of making a profit from the deal. Remember, no lender goes into a loan deal with their eyes closed, so personal loans with no credit check is a carefully considered strategic lending option.
The simple fact is that statistics consistently show that borrowers are more interested in rebuilding their credit reputation than in taking the money and running. And in any case, a large percentage of bad credit borrowers today are honest borrowers who were victims of the economic collapse of four years ago. Therefore, getting approval despite bad credit is not such a big risk.
Also, credit score was never a major aspect of the approval process, so if any part of it has to be set aside for faster access to personal loans, there is minimal risk associated with the credit check.
limits on loans
But lenders aren’t going to loan $50,000 to someone who isn’t completely checked out. They have clear limits on the size of the personal loan, with no credit checks offered only for small amounts ranging from $100 to $1,500. What’s more, they come with very high interest rates to protect them from losses.
There is no secret to these limits, with low loan limits ensuring maximum losses are kept low. This means that an approval offer despite bad credit is actually useful for applicants who need to pay off specific emergency expenses or loans. Perhaps, a hospital bill or a final notice on a late mortgage payment, for example.
For borrowers, the small loan does little to help with the pressure of repaying these personal loans when high interest rates (25%) are charged, and repayment periods are as short as 14 days only.
Payday And Cash Advance Loans
The fact is that these loans are better known as payday loans or cash advance loans. This is because they are given against an impending paycheck and not based on a longer repayment period. A personal loan offer with no credit check means that approval is almost certain, just proof that the next check is large enough to cover the amount borrowed plus interest.
Repayment is usually completed in one go, a policy that also protects the lender as there is less opportunity for the borrower to fall behind or default. What’s more, although offered approval despite bad credit, their chances of getting their money back are almost guaranteed.
Still, the deal requires that the borrower budget to repay $1,875 with a $1,500 personal loan – a huge amount to take from one paycheck.
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