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Are Signature Loans With No Credit Check Too Good to Be True?

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Signature loans that don’t require a credit check and offer fast cash may sound great in theory, but the risk is typically not worth it.

Signature loans are a type of unsecured debt, so there is no collateral involved. Banks and financial institutions will run credit checks and set strict requirements because of the lack of collateral. On the other hand, some predatory lenders will offer signature loans with no credit check that prey on people in dire financial situations.

Signature loans with no credit check: Payday loans in disguise

Signature loans without a credit check are basically payday loans in disguise, or short-term cash loans. With these loans:

  • You don’t need collateral
  • The lender won’t run a credit check
  • You can receive approval with bad credit

A traditional signature loan, on the other hand, is a personal loan with the following typical features and requirements:

  • No collateral
  • Terms typically ranging from 24 months to five years (or longer)
  • Fixed interest rates
  • Good credit and a steady income to show you can repay your debt

Let’s take a closer look at payday loans versus personal loans, or traditional signature loans:
How payday loans compare to personal loans

How payday loans compare to personal loans

Payday loanPersonal loan
Average APR391%9.30% to 22.16% (depending on credit score)
Average loan amount$375$6,092
Typical terms2 weeks24 to 144 months
Average fees$55 for a two-week loan1% to 8% of the loan amount
Credit score requirementN/ATypically 600

What are traditional signature loans? The basics

Traditional signature loans are a type of personal loan. This means that lenders typically won’t require borrowers to put down collateral (also known as unsecured loans), but they will have to undergo credit checks — plus, the loans will come with fixed interest rates and monthly payments.

Because your credit score plays a large role in your approval for a signature loan, you’ll want to check your credit score before applying and make any necessary improvements.

While traditional signature loans are typically legitimate, borrowers will need to be cautious of signature loans with no credit check.

Are payday loans worth the cost?

A payday loan can be a helpful tool during tough times, but there are several dangers that can sink you even further into debt:

  • Most payday loans require repayment in full within just a few weeks
  • They come with hefty interest rates in the triple digits
  • You’re liable to incur a variety of charges for nonpayment, including late fees, returned payment fees or insufficient funds fees

They can be a viable option for borrowers with bad credit and limited access to traditional credit, such as personal loans or credit cards. As many as 12 million Americans take out payday loans every year, according to Pew Charitable Trusts, and 70% of those borrowers use the funds for basic expenses, including rent and utilities.

However, it’s vital to remember that some payday lenders target financially vulnerable groups. Payday lenders are more likely to set up in areas with:

  • Higher-than-average poverty rates
  • Lower income levels
  • More single parents

If you’re unable to repay a payday loan, the lender may let you renew or roll over the initial loan for a finance charge. This can lead to being stuck in a vicious cycle of debt and poverty.

Pros and cons of a payday loan

ProsCons
  Quick access to funds  Hefty interest rates
  Can receive loans for $1,000 or less  Short terms
  Available to those with bad credit  Typically repaid in lump sum

Common requirements for a signature loan with no credit check

While approval criteria for payday loans will vary from lender to lender, companies providing these types of loans will typically require the following:

  • You’re 18 years old or older
  • You’re a U.S. citizen or permanent resident
  • You have a bank account
  • Basic contact information, such as your phone number, email and mailing address
  • Proof of income, such as your W-2 or tax returns

Proving your income demonstrates to lenders that you have the ability to repay the loan. Payday lenders will often require that you provide your bank account information so they can make automatic withdrawals from your account, which can lead to overdrafting.

How to manage a payday loan

If you decide a payday loan is still the right option for you, there are various details you’ll want to be aware of ahead of time.

Be sure to shop around. Don’t just go with the first offer you receive. By comparing rates, fees and terms, you may be able to save yourself some money. You may also want to research company reviews, as some payday loan lenders may be less reputable than others.

Make sure you’re able to repay the loan. You don’t want to get into a legally binding agreement with a payday lender and then be unable to repay the debt. Many borrowers that have to take on a payday loan end up having to take out another to pay off the original one, trapping them in a cycle of debt.

Read the fine print before you sign. To avoid any unpleasant surprises or terms you aren’t comfortable with, it’s important to carefully read over any agreement before you sign. If you have any questions on the loan, be sure to reach out to the lender to clarify.

Ultimately, payday loans are often a risky choice for many borrowers. The sky-high interest rates and fees can make them difficult to pay it back. Instead, look into other financial alternatives before making a final decision.

Alternatives to signature loans with no credit check

Payday alternative loans

Some credit unions offer payday alternative loans (PAL) for their members who need a short-term loan, but also have poor credit. A PAL can offer you greater financial stability and presents a lower risk than electronic signature loans with no credit check.

PALs are regulated by the National Credit Union Administration, which is a federal agency. You must be a member of a credit union for at least one month before applying for a PAL.

Credit unions can only charge up to $20 for application fees on payday alternative loans, which are available for amounts between $200 and $2,000. Unlike most traditional payday loans, you’ll have one to 12 months to pay off the PAL. You can only receive three PALs in a six-month period.

PAL details

Average APRUp to 28%
Average APRUp to 28%
Amount$200 to $2000
Terms1 to 12 months
Who qualifies?Those who belong to a federal credit union

Secured credit cards

Secured credit cards could offer increased credit lines for smaller security deposits. It could make sense to go with a secured credit card that not only provides you with the funds you need, but can also help you build or rebuild your credit.

Secured credit card details

Average APR22%
Average APR22%
AmountDependent on creditworthiness
TermsDependent on credit card
Who qualifies?Those new to credit up to those with excellent credit

Home equity loans

Home equity loans provide you with money borrowed against the value of your property. Most lenders allow you to borrow up to 85% of your home’s value, and you’ll receive the cash upfront.

Once you’ve paid closing costs (usually 2% to 5% of the loan amount) and other fees, you’ll typically repay the principal and interest over five to 15 years, though you can get loan terms up to 30 years.

Home equity loans are secured because your property is the collateral. This makes it safer for banks to loan you money, which usually translates to lower interest rates and larger borrowing amounts. However, failure to repay the loan can result in you losing your house.

Home equity loan details

Average APR5.28 to 5.82% (depending on terms)
Average APR5.28 to 5.82% (depending on terms)
Loan amountTypically up to 85% of your home’s value
TermsUp to 30 years
Who qualifies?Those with equity in their home and a good to excellent credit score

Home equity lines of credit

Home equity lines of credit (HELOCs) are similar to home equity loans in that they’re based on your home’s value, but you receive a borrowing limit that you pay off over time, like a credit card.

Most HELOC borrowing limits go up to 85% of your home’s equity value. You may also be subject to more in-depth checks of your:

  • Credit score
  • Current income
  • Monthly debts

Notably, most HELOCs come with variable interest rates — this can make it more challenging to plan your budget because the payment amounts are less predictable.

Home equity line of credit details

Average APR5.61%
Average APR5.61%
Loan amountTypically up to 85% of your home’s value
Terms10-year draw period; 10- to 20-year repayment period
Who qualifies?Those with equity in their home who have a good-to-excellent credit score

Think twice before taking out a signature loan with no credit check

Signature loans with no credit check could destroy your financial stability. Along with the high interest rates and short repayment terms, you won’t receive a boost to your credit score, since most payday lenders don’t report positive payments to the credit bureaus.

Weighing the risk versus the reward can be helpful even in the worst financial situations. Because payday loans or signature loans with no credit checks can leave you in a precarious financial position, consider slashing your budget to only the essentials or picking up a side hustle to earn extra cash.

While you may be sacrificing your time or your favorite streaming service, it may be worth it in the long run to avoid the potential negative consequences of a signature loan with no credit check.

Signature loans with no credit check: FAQ

Does a signature loan require a credit check?

Traditional signature loans often require that you go through a hard credit check, though some lenders may offer soft credit checks during the initial application process. A signature loan that does not require a credit check is essentially a payday loan. If you’re in need of a loan but are struggling with your credit score, many lenders are still willing to work with bad credit borrowers.

What credit score do you need for a signature loan?

The type of credit score you need for a signature loan will depend on the lender. Many personal loan lenders typically require that you have a credit score of at least 600. Keep in mind that the better your credit score, the lower APR rates you may be offered.

Which type of loan does not require a credit check?

Some signature loans don’t require credit checks; however, these types of loans are basically payday loans, which also do not require credit checks. Borrowers should be wary of loans with no required credit checks, as the lenders that offer them are sometimes predatory and won’t report the loan to credit bureaus if you repay it.

Are signature loans easy to get?

Signature loans may be challenging for borrowers to get if they don’t have good credit. In these instances, they may need to use a co-borrower or need to look into a secured loan (which will require collateral, like

a savings account or vehicle). Both of these tactics can make it easier for borrowers to be approved for a traditional signature loan.

 

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