There is a school of thought that should a person get a poor credit rating that their chances of ever being accepted for a loan has fallen to next to none. But this is not true. The rise of no credit check loans has meant that borrowers who fall off that horse, can now get straight back on.
This traditional view is not rooted in fiction. There was once a very stern approach taken by banks and lending institutions when it came applicants with bad credit ratings. The fault for defaulting, it was believed, was firmly on the shoulders of the borrowers. In such an environment, checking credit for a loan was a central factor in accurately assessing the true risk of lending to applicants.
But the difficult financial climate of the last few years has resulted in many honest borrowers being forced into defaulting or repayments delays. Some lenders have, therefore, opted to approve loans without credit checks in recognition of the special circumstances that have lead to their position. But there are always conditions too.
How They Work
Because of the times we live in, lenders are that little bit more forgiving if the circumstance that have led to borrowers defaulting suggest it was not their fault. In these cases, a no credit check loan is reckoned to be a fair break to give. The crucial reasoning behind this leap of faith is that the borrower would have been fine had their circumstances not changed, for example if the borrower had not lost a job or seen their earning capacity reduced dramatically.
The lenders understand that this can mean a temporary loss of income, not a permanent one, so in offering loans without credit checks, they are showing confidence that the situation will improve. Of course, checking credit for a loan is not abandoned by every lender, so there may be some searching required to source a good deal.
No credit check loans are designed to give a break to individuals with bad credit, including defaulters, late payers and those who have already been to bankruptcy court. However, not all terms are ideal and, under normal circumstances, a consumer would be expected to turn the deal down. Being in a precarious financial position means the lender can charge a higher rate.
The real issue, of course, is that by offering loans without credit checks, lenders are providing a chance for the borrower to regain a good reputation, and their paying a little extra is worth the investment. However, depending on whether the loan is secured or unsecured, there are some preferences to consider.
Secured loans have collateral so there is little difficulty in getting one. Even in normal circumstances, the idea of checking credit for a loan is not so important as the security lies in the collateral. But since unsecured loans have no collateral, it is advisable that a small sum is borrowed rather than a large one. That way the repayments are kept to a minimum, while the loan can be paid off quickly too.
Online Lenders Option
It is worth noting too, that the best place to find lenders offering no credit check loans is the internet. This is for two reasons, firstly because the regular lending sources tend not to offer such loans, and secondly because they are usually small financial firms who do not have the presence that bigger names have.
Their only condition approving loans without credit checks is that an automatic monthly payment be arrangement with the bank of the borrower, in that way ensuring payment is made. If that is done, then checking credit for a loan is hardly necessary anyway.