You can get a personal loan without a credit check, but it's not always easy, and there's some important planning you'll need to do.
Step one is ensuring that a personal loan that doesn't require a credit check is really your only option. These loans very often—but not always—charge considerably higher interest rates than more traditional personal loans which factor in your credit scores and credit reports.
Having bad or no credit can make getting a personal loan very difficult. Banks, credit unions, and other lenders are generally reluctant to approve a personal loan to borrowers with bad credit or no credit. As a result, they lean heavily on credit checks to gauge the likelihood of a borrower paying a personal loan back.
Knowing your credit score can make all of this easier to manage. If you recognize that you have bad credit or no credit, you can focus your personal loan search on options where a credit check isn't required.
1. Check Your Credit
Even if you think you'll end up choosing a personal loan from a lender that doesn't require a credit check, it's important to know where you stand by checking your credit score.
Most lenders will look at your FICO® credit score, which has a range of 300-850, and within that range, a fair credit score is 580-669 and a poor credit score is 579 and below.
Generally, a credit score that is below 669 is considered "sub-prime" and could be subject to higher interest rates. Beyond just the score, here are some other red flags:
- You are only making minimum payments on your credit account payments. Creditors and lenders look more favorably on consumers who pay more than the minimum amount due on their credit card and lending account bills.
- You are falling behind on credit account payments. If you are habitually late paying your credit card, mortgage, rent or other household bills, your credit score will suffer, as lenders and creditors favor borrowers who pay their bills on time.
- You are regularly paying higher interest rates on things like credit cards and auto loans that you see advertised. Paying higher interest rates is a sign that your credit is viewed less than favorably by creditors and lenders, with higher Annual Percentage Rate (APR) offering lenders protection should you default.
2. Approach a Bank or Lending Institution Directly
It's becoming more commonplace for banks and lenders to factor in other indicators of good financial standing aside from a credit score.
Those factors include:
- Proof of full time employment for 60 days or more.
- A bank account in good standing (no overdrafts) for 90 days or more.
- Proof that you regularly pay your rent and household bills, like an electric bill.
3. Be Prepared
Be ready to prove your credit-worthiness and make your case as a good personal loan borrower with the following documents when you meet your lender:
- Tax returns for the past two years
- Employment history and pay stubs or other proof of a paycheck
- Borrowing history, including a home mortgage, auto loan, student loan, or other loan (and the progress you've made paying that debt off)
- Documentation on credit card debt
- Bank statements
Any documented proof that you've paid bills on time and have a regular employment history will boost your chances of getting a personal loan without a credit check.
Where Can You Get a Personal Loan?
Online lending firms like Prosper, Lending Club and Allstart—all are Experian person loan partners—offer personal loans with short application forms, competitive interest rates, and longer repayment timetables (up to 36 months in most cases).
They also provide personal loans without a hard inquiry on your credit report (which can negatively impact your credit score) to borrowers with lower credit scores.
To qualify for a personal loan without a credit check from an online lender, you'll likely need to clear these hurdles:
- Have at least two active credit accounts open
- Have a credit history of at least 36 months
- Debt-to-income ratio of less than 40%
- Be able to verify employment and income
Once you've qualified for a loan, some online lenders will rely on their own internal borrower scoring model to determine the amount you can borrow and the Annual Percentage Rate (APR).
Many credit unions allow members to take out a personal loan without a credit check. They specialize in smaller personal loans and will work closely with borrowers to get a personal loan. Federal credit union personal loan interest rates are capped at 18%, per federal law, as of April 2018.
Payday Loan Companies
In your hunt for a personal loan without a credit check, you may run across payday loan companies.
Payday loan companies, and their offshoots, title lenders, can provide a personal loan to you, but the interest rates can be astronomically high. Some payday loan rates clock in as high as 780% compared to as low as 10% for standard, bank-issued personal loans for borrowers with good credit. The average payday loan has an APR of around 400%.
Payday loans also come with high fees and extremely short repayments terms—sometimes as short as two weeks. Miss a payment, and the borrower is hit with more fees.
Auto title loans are another risky personal loan option which often doesn't require a credit score. With title loans, personal loan borrowers must give their auto title loans to a title loan lender in exchange for a loan equal to the value of the borrower's vehicle. Borrowers must own their vehicles outright to qualify for a title loan.
The downside risks for title loans are abundant. For example, if you can't repay the auto title loan, you could lose your vehicle. Or if you cannot meet the payment schedule, you risk higher fees by rolling over the payments to the following month.
Make no mistake, unless you're in extremely dire financial straits and you need cash quickly, the potentially very expensive combination of high interest rates and short repayment timetables that come with payday loans and title loans should make consumers think hard before taking out a payday loan.
Check the Fine Print When Getting a Personal Loan
After you've shopped around and settled on a way to get a personal loan without a credit check, make sure you thoroughly review any loan contracts. Check for any language on fees and charges, and understand the ramifications of not paying the loan back on time.
Also, continue working on your credit and keep seeking ways to improve it. Pay bills on time, pay more than the minimum balance due on credit card debt and put a lid on personal spending.
Cross those items off your "to do" list and you'll significantly improve your chances of getting the best personal loan you can get.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer, or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.