No-Credit-Check Loans: Consider Alternatives First

No-credit-check loans are expensive and can trap you in a cycle of debt. Consider other loan options and resources.

Amrita JayakumarJuly 10, 2020

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No matter how dire your need for fast cash, think twice before getting a no-credit-check loan. Why? Because they’re potentially as predatory as payday loans or car-title loans and can trap you in a cycle of debt for years.

These loans — also known as no-credit-check installment loans — come with annual percentage rates reaching upwards of 400% in some cases, far above rates you'll find at credit unions or with online lenders, two alternative options when you need fast cash.

What's wrong with no-credit-check loans?

Consider an example: If a lender charges a 400% APR on a two-year, $2,000 loan, you'll pay $667 monthly to pay it off. That's more than five times — $549 in dollar terms — than the $118 you'd pay monthly at the highest APR many personal loan lenders offer, which is 36%.

Credit score

Example APR

Monthly payments

Total payments

Excellent

7%

$89

$2,136

Poor

36%

$118

$2,832

No credit check required

400%

$667

$16,008

In addition to no credit checks, these installment loans have no gauge of your ability to repay and easy access to your bank account for automatic withdrawals.

The loan amounts range from $100 to several thousand dollars, and borrowers typically make equal, fixed payments over months or years. But sky-high interest rates on these loans make them harmful in the long run.

The loans are usually marketed with a promise of same-day or next-day delivery of funds. Some lenders also tack on additional products like credit insurance or charge fees that drive up the cost of the loan even more.

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Alternatives to no-credit-check loans

If you need fast cash, you may be able to find alternatives to no-credit-check loans by talking to credit counselors, religious organizations and community nonprofits. Here are more options:

CREDIT UNIONS

Even if your credit is poor, your local credit union may be worth a shot.

Most credit unions offer small-dollar loans of $500 and above, and they are often willing to work with you to make the payments affordable. Many also have starter credit cards or loans to help you build a credit history. The interest rate charged by a federal credit union is capped at 18%.

PAYDAY ALTERNATIVE LOANS

Known as PALs, these credit union-issued loans help small-dollar borrowers avoid the debt trap created by traditional payday loans.

ONLINE LENDERS

Lenders like OneMain and Avant consider borrowers with poor credit, even with scores below 600. OneMain has higher rates but provides faster access to cash, while Avant is a good option for debt consolidation.

Other lenders like LendingPoint and Upstart consider factors apart from credit score, such as employment status and income. However, watch for high fees that drive up costs.

Check estimated rates for online loans

No-credit-check lenders

Lenders like OppLoans that offer no-credit-check installment loans are very expensive forms of credit. Consider these loans only after you’ve ruled out other options. Capital Good Fund offers lower rates, but its no-credit-check loans are available in a limited number of states.

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