Taking out a loan is no cinch – there’s a standardised procedure that needs to be followed. It’s a known fact that one needs to pass through a stringe
Taking out a loan is no cinch – there’s a standardised procedure that needs to be followed. It’s a known fact that one needs to pass through a stringent credit check to secure a loan. But did you know that this credit check impacts your credit score for a brief period?
Whenever you apply for loans, lenders run a hard credit enquiry to assess your creditworthiness, taking away a few points from your credit score in the process, where no credit check loans come in.
Read on to learn more about how online no credit check loans work. Is there a way to check your lender’s FCA authorisations? Find out here.
What are online loans ‘no credit check’?
No credit check loans are quick cash advances meant for credit-challenged people seeking loans to cope with financial emergencies without a credit check. You can typically borrow up to £5000 with a no credit check loan, which you might have to repay within a month.
Multiple individual credit checks in a short span can be detrimental to your credit score. This is one of the key reasons people with a bad credit score resort to no credit check loans. Unfortunately, many people are under the impression that no credit check lenders offer loans without credit checks.
However, all FCA-authorised lenders are required to carry out a hard credit enquiry to assess an applicant’s legitimacy, to say the least. Once you apply for a loan or accept a pre-approved offer, the lender will perform a hard credit check on you before lending you money. Thus, you can’t avoid a credit check if you apply with a legitimate lender.
No credit check lenders, too, run a thorough credit check on applicants. However, these lenders offer loans that don’t depend so much on your credit rating. Lenders run a credit check to check the licitness of a borrower’s identity, at the very least. So, a credit check is inevitable, but it may not necessarily drive their lending decision.
Although lenders may set relatively higher interest rates on loan offers if you apply for no credit check loans with a bad score. So, you may be able to qualify for the credit, but not for competitive rates and loan terms with a low credit score.
FCA authorised loan brokers like Loan Princess can help you compare personalised loan offers from multiple lenders to find your ideal loan. Loan Princess has a panel of FCA approved lenders who offer a variety of credit solutions for people with a bad credit score.
Can I borrow a small payday loan (bad credit)?
Payday loans, one of the most notorious forms of high-cost short-term lending, is a type of cash advance that you can borrow to overcome an unexpected financial crunch. People typically borrow up to £2000 with payday loans, which can be paid off within a week or a month.
The disbursal period for payday loans is not very long – you may sometimes get a deposit within a few hours. But, it would be best to tread cautiously – as quick and accessible as payday loans are, they’re replete with repayment implications and high-interest rates. The APRs for payday loans sometimes average above 300%.
Despite such a controversial start, payday loans continue to be one of the most sought-after cash advances for people with bad credit. However, it was only until recently that the Financial Conduct Authority introduced a set of restrictions, including price capping, on payday loans.
Now, a lender can’t charge you over £24 for every £100 that you borrow over a 30 day repayment period. Additionally, penalties for missed payments are capped at £15, plus the interest. The overall cap also is instrumental in safeguarding the consumer’s interest as it prohibits lenders from charging unreasonably.
However, payday loans can be tough to deal with despite these restrictions. Unlike personal loans, you cannot split your payday loan repayments across a couple of months. Payday loans have a much shorter repayment period – a week or a month at the most. It’s a real challenge to juggle your payday loan repayments along with monthly expenses. So, weigh the pros and cons of payday loans before borrowing one.
How to check a lender’s FCA authorisations?
The FCA has dedicated a portal to record background details of all lenders that comply with their guidelines. You can visit the FCA’s Financial Services Register to check if your lender’s legitimacy. Once you type in details about your lender’s company, the system will parse through an array of records to find your lender and show you whether or not the FCA approves this lender.
Can I borrow a personal loan with no credit check?
You can’t dodge a credit check if you wish to borrow a personal loan. However, most lenders who offer unsecured personal loans seek applicants with a stellar credit history. A credit check is a gauge for lenders to identify which borrowers have the potential to repay their loan and which ones have a tendency of defaulting.
While you may find a personal loan lender offering loans to low credit borrowers, you will not be able to escape a credit check. Plus, lenders set high-interest rates for borrowers with a low credit rating. So, assess your financial situation to see if you can afford a personal loan.
Alternatives to no credit check loans
- Secured personal loans: Borrowing a predatory loan from a shady lender should ideally be your last resort. If a credit check is what scares you, you could consider a secured loan to cope with your expenses. Secured personal loans require you to secure an asset to obtain the loan. However, these loans have grave repayment implications – the lender could repossess your assets if you fail to repay the loan.
- Guarantor or co-signer loans: A guarantor is a close friend or family member who co-signs your loan and partakes in the loan’s obligations with you. Having a guarantor by your side could boost your chances of securing a loan with lower interest rates. However, your guarantor should have a stellar credit history and satisfy the lender’s prerequisites.
- Credit cards: If you have a low credit rating, your credit card options may be scarce. If you do find a care provider, they may charge you unreasonably. You could consider a secured credit card wherein you deposit a sum of money with the credit card provider, and they issue you a card with a credit limit the same as your deposit. Such cards can help you establish a credit history.
People resort to no credit check loans to protect their credit score from dipping due to multiple credit checks. However, all FCA authorised lenders conduct thorough credit enquiries before lending money to borrowers. You may perceive no credit check loans as a safe and convenient option, but these loans charge excessively. Thus, it would be best to carefully measure the pros and cons before making an informed decision.