Ever find yourself in a situation where you need a chunk of money and you need it like yesterday? Maybe you’re remodeling your office or your furnace went out, or maybe your pet needs emergency care. Perhaps you’ve decided to join Vancouver’s cycling community and you need money to buy a bike.
If you have good credit, you can probably finance through your bank, but what if you don’t?
What Is A No Credit Check Loan?
A no credit check loan is a quick and easy way to cover unexpected costs for people with poor or no credit. Since this type of loan relies on a soft inquiry as opposed to a hard inquiry, you are more likely to qualify.
When lenders perform a soft inquiry, they’re relying on things like proof of income and bank statements as a way to decide if you qualify. Such lenders believe there’s more to being credit-worthy than just what’s on your credit report.
● Impact On Your Credit Score
There are a few key differences between this type of loan and more traditional financing. For starters, approval rates are not based on your FICO score. Since most loans require a credit score higher than 670, when you apply for a loan that doesn’t check your credit, it doesn’t matter what your score is. That’s what makes it attractive for people with bad or limited credit.
However, it also means that the work you put into paying it off won’t improve your score. Keep in mind, though, that it will definitely impact your score negatively if you miss a payment or default on your loan altogether.
● Unsecured Vs. Secured
Loans that are approved without a credit check are also considered unsecured. This means they’re offered in good faith and your promise to pay, whereas bank-approved loans are often secured using a car or house as collateral.
What does this mean for you? It means, if you default on the loan, the lender can sue you. If you default on a secured loan, the lender has a right to take your personal property.
● Interest And Repayment Terms
Another major difference is the terms of the loan. Loans financed through a bank or credit union typically have lower interest rates and longer terms because they’re based on your creditworthiness. What that means is if you have poor credit, you’re considered a risky borrower to a bank.
● How much do you need and can you absorb the payment?
One thing to keep in mind is that eventually, this loan needs to be paid back. It’s important to only borrow what you need and that you can absorb the payment in your budget. As tempting as it is to borrow more, the long-term impact could be catastrophic if you borrow outside your budget.
● Loan repayment terms and interest rates
Make sure it’s clear what the repayment terms and interest rates are. Most lenders offer a couple of payment options but some only give you a specified window to pay it back. Interest rates are also often higher on this type of loan, causing you to pay back significantly more than you initially borrowed.
● Know how it impacts your credit
When lenders don’t perform a credit check, it typically means the loan isn’t reported on your credit report either. While this is to your advantage in initial qualification, keep in mind it doesn’t necessarily help you improve your credit. You’ll want to make sure you make all of your payments on time, too, because if you default, you better believe it’ll make an impact.
● Watch out for LOAN SHARKS
Loan sharking isn’t always easy to spot, so be aware of anything that just doesn’t feel right. If it makes you uncomfortable, ask questions. Never agree to something that isn’t in writing and make sure there’s some form of an electronic record of your payments.
Once you’ve considered your options and decided this is the route you’re taking, it’s time to apply. Getting qualified for a no credit check loan in Vancouver and surrounding areas is quick and easy! Take a look at this checklist to see if you might qualify:
- Are you over the age of 19?
- Is your monthly income greater than $4,000?
- Can you verify at least three months of income?
- If you’re looking for a business loan, are your monthly sales at least $10,000?
If you answered YES to all of those questions, you’re ready for the next step. Most lenders offer easy online applications and funds are deposited almost immediately. That’s another thing you won’t find when you borrow with a bank or credit union.
While this guide isn’t all-encompassing, you now have a basic understanding of what a no credit check loan is and how to get one. As always, borrowers should exercise caution before taking out any loan and read the fine print. After all, you don’t want to find yourself in a worse situation than when you started.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.