Creditworthiness is one of the important factors lenders typically consider before offering personal loans. This metric is measured by an individual’s credit score. Often, those with less-than-perfect credit scores are less likely to get their personal loans approved. Fortunately, there are many personal loan options available for borrowers with poor credit histories. These can benefit those in need of liquid cash. Besides, such loans often do not involve a credit check.
Personal loans for poor credit score
No-credit-check loans are personal loans offered by lenders and don’t involve a hard credit inquiry. These come with moderate eligibility criteria for borrowers who would otherwise be unable to get personal loans. Personal loans tend to be unsecured, meaning no tangible assets are attached to them as collateral. In many cases, loan approvals depend on the borrower’s income or employment status. Usually, no-credit-check loans are approved and rolled out within a day. There are multiple kinds of no-credit-check same-day loans or personal loans (unsecured) available with no credit score.
1. Cash advances
These advances are loans that people can withdraw against their credit card limit. Cash advances are considered one of the quickest forms of personal loans as all an individual needs to do is use their credit card’s PIN to withdraw money from an ATM. Other than this, they can also get cash advances from their bank branches, given that they provide proper identification documents. Alternatively, they can transfer money in the form of a cash advance through their phone by moving the amount from their credit line to an account of their choosing. However, it is important to note that not all credit card companies allow this convenience.
Normally, individuals can withdraw anywhere from about $100 to around 30% of their credit limit through a cash advance. Credit card companies charge a nominal cash advance fee even if borrowers pay the money back the next day. Cash advance fees are typically around $10 or 3% to 6% of the cash advance amount—whichever is greater.
2. Installment loans
Credit unions are among the most prominent lenders who frequently provide no-credit-check loans. Here, borrowers with a poor credit history can avail themselves of a personal loan, which they must repay in periodic installments. Some credit unions offer no-credit-check installment loans with loan terms of 2 to 18 months.
Alternatively, certain online lenders offer installment loans that come with soft credit checks. This translates into a slightly more lenient creditworthiness evaluation. These installment loans may come with longer loan terms to reduce financial burden.
3. Buy now, pay later
Although this cannot be considered a personal loan, it serves as an alternative, offering similar and quick financial relief to borrowers. Buy Now Pay Later (BNPL) services allow individuals to make purchases and pay for them over a period of time in interest-free installments. Often, BNPL lenders do not ask for a credit check. But, in some instances, some lenders may conduct a soft inquiry, which may involve less stringent creditworthiness requirements.
4. Title and payday loans
Title loans are secured loans in which an individual’s car’s title is listed as collateral. Payday loans, also known as paycheck advances, are loans offered against one’s paycheck. Both these loans are expensive when it comes to repayment. Still, those in need of money can opt for these.
Where to apply for no-credit-check personal loans
Many banks, private and individual lenders, and other financial institutions offer no-credit-check loans to those who need them. The loan amount, repayment terms, and interest rates tend to depend on the lender and market rates in general. Typically, individuals can avail themselves of no-credit-check personal loans for very poor credit by contacting online lenders, auto title lenders, pawn shops, payday lenders, banks or credit unions (for secured loans), and family members or friends.
While certain lenders can be accessed online, in other instances, borrowers will have to visit their branch personally and make a formal request for a no-credit-check loan. Documentation such as a proof of income certificate, a loan application form, and direct deposit documents are required for loan approval.
Ways to improve credit score
Personal loans for very poor credit scores are handy when there is an immediate requirement of liquid cash. That said, it is important to note that the repayment interest rates of these loans tend to be high. Also, individuals should look for hidden charges attached to these loans. They don’t have to worry about such issues if they improve their credit score instead. This way, they can easily make use of traditional personal loans.
1. Having a long credit history
Individuals often fixate on their credit score without keeping in mind one critical detail; it changes based on the number of borrowings and successful repayments one makes. Individuals with a history of successfully managing their credit for a long period of time increase their likelihood of getting personal loans, as lenders know that borrowers can pay the loans off.
2. Keeping up with the utilization ratio
This is a key parameter lenders use to check how an individual manages their ongoing debts. So, individuals should keep their credit utilization ratio below 30%. This helps them build their credit score, improving their chances of getting loans approved and getting low interest rates.