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What to Know About No-Credit-Check Personal Loans
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Personal loans always require a credit check, so they’re not ideal when you’re looking to borrow money if you don’t have good credit. You can find loans that don’t require a credit check, but they’re typically payday loans or car title loans. These are expensive, high-risk borrowing options since they come with high APRs and collateral requirements.
No-credit-check or payday loans can trap you in a cycle of debt, so it’s best to avoid them altogether and instead consider your alternatives.
Can you get a loan with no credit check?
No, you can’t get a legitimate personal loan without a credit check. Personal loan lenders determine your eligibility as a borrower based on your credit history, which means they’ll conduct a credit check during the application products.
You can, however, get a title loan or a payday loan without a credit check, but you should avoid doing so. Car title loans use your car title as collateral, so you risk losing your vehicle if you can’t repay the loan.
Payday loans are offered by predatory lenders, and they come with extremely short repayment periods and high APRs. See the difference between personal loans and payday loans in the table below:
|Personal loans vs. payday loans|
|Personal loan||Payday loan|
|Loan amount||$1,000 to $50,000 or more||Up to $500|
|Loan length||2 to 5 years||2 weeks|
|Estimated APR||6% to 36% APR||~400% APR|
How to spot a payday loan lender
Payday loan lenders advertise fast cash with no credit check, but they charge a hefty fee to do so. Before you take out a no-credit-check loan, make sure to look out for the following red flags:
- Short repayment periods. Payday loan terms typically last two weeks, whereas legitimate personal loans will have a repayment period of a few years.
- Lump-sum repayment. Personal loans are installment loans, meaning they’re repaid in smaller monthly installments. Payday loans must be repaid in full, plus financing charges, at the end of the two-week repayment period.
- Financing charges. Instead of a typical APR, payday loans are repaid for a fee. For example, the fee may be $15 per $100 borrowed, so you would pay a $45 fee on a $300 payday loan.
- Rolling over. If you can’t repay your payday loan, you can roll it over into a new payday loan for another fee. This increases the cost of borrowing and can trap you in a cycle of debt you can’t repay.
5 alternatives to no-credit-check loans
It’s best to avoid no-credit-check loans altogether, but that doesn’t mean you can’t find a way to make ends meet without a credit check. Consider your alternatives if you need fast cash without a good credit score:
- Download a paycheck advance app
- Borrow against your 401(k)
- Check your local credit union for loans
- Enlist the help of a cosigner
- Borrow from friends or family
1. Download a paycheck advance app
Paycheck advance apps like Earnin and Dave let you borrow money from your upcoming paycheck often without charging fees or interest at all. Here’s how it works:
- You connect the app with the bank where your paychecks are submitted via direct deposit.
- You verify your pay schedule and hours worked.
- The app lets you borrow a small amount of money from your next paycheck based on hours you’ve already worked.
These apps are a good alternative to high-interest payday loans since they often come with little-to-no fees, and they don’t require a credit check. However, do your research to make sure the app is legitimate. You shouldn’t borrow money without a credit check until you’ve read the fine print.
2. Borrow against your 401(k)
401(k) loans let you borrow from your own retirement account, so they don’t require a credit check.
|401(k) loans at a glance|
|Amount||Up to $50,000 or half the vested amount|
|Loan length||Up to 5 years|
|APR||Prime rate plus 1%|
You can borrow up to $50,000 or half the vested amount, whichever is less. You’ll have up to 5 years to repay the loan, and payments must be made at least quarterly. The APR is typically the prime rate plus 1%, and your payments including interest are paid back into your 401(k) account.
A 401(k) loan may be a good alternative to other no-credit-check loans, especially if you have sufficient money saved up in your retirement account to cover the cost. However, they’re not always a good option. Here are a few drawbacks to consider:
If you can’t repay the loan, you’ll pay income taxes on the amount borrowed, plus a 10% withdrawal penalty if you’re younger than 59 ½.
If your employment is terminated, you may be required to repay the loan in full in as little as 90 days.
You may have to pay fees, such as origination fee, application fee and annual maintenance fees.
Not all retirement plans allow 401(k) loans.
3. Check your local credit union for loans
Credit unions are nonprofit financial organizations, which means that loan rates may be more competitive than what’s offered by other lenders and banks. Plus, credit unions may be more willing to work with borrowers with less-than-stellar credit who have been members for a certain period of time. However, applying for a personal loan from a credit union still requires a credit check.
For bad-credit borrowers, payday alternative loans (PALs) offered by federal credit unions can be a great alternative to personal loans. These loans were designed to be a safe and affordable alternative to payday loans. You can borrow up to $2,000 depending on the length of the loan, APRs are capped at 28% and application fees are a maximum $20. As these types of loans are not offered by all credit unions, check with your local branch to review your options.
4. Enlist the help of a cosigner
Some lenders and banks may let you apply for a personal loan with a cosigner who can essentially vouch for your ability to repay the loan. This can make it easier to qualify for a personal loan, and you may even qualify for a personal loan with a lower interest rate.
It may be difficult to find a cosigner with good credit who is willing to take on this responsibility, since cosigning on a loan comes with a fair amount of risk. The cosigner is equally responsible for the debt if you don’t repay, which means that both the borrower and cosigner:
- Will have the loan on their credit reports
- Will suffer a credit hit if payments aren’t made
- Can be sued if the debt is not paid
Before you take out a personal loan with a co-borrower, make sure you have a plan in place if you can’t make payments on the loan. And not all personal loan lenders allow cosigners.
5. Borrow from friends or family
If you need fast cash without a credit check, you could consider borrowing money from a loved one. Not everyone will have access to this option, but it can be a good way to avoid paying interest and fees if you just need some money to tide you over during a financial emergency.
Before you agree to borrow money from a friend or family member, you should lay out the terms and expectations upfront. Make sure to discuss the loan amount, when it will be repaid and if any interest will be charged. Keep an open line of communication so that your relationship doesn’t suffer as a result of the transaction.
How to establish credit when you have no history
The need for a no-credit-check loan disappears if you can establish or rebuild your credit. Try these strategies for the best results:
Pay down debt. One of the largest factors affecting your credit score is your credit utilization ratio, which is the amount of credit you have out in your name versus the amount of credit you have available. Your credit utilization ratio should be below 30%, ideally. To the extent that you can, pay down your credit card debt and keep your debt levels low.
Keep making payments on time. Another big factor of your credit score is your payment history. So you can do a lot of good by paying everything on time, from your student loans to car loans and any other outstanding debt.
Apply for a secured credit card or loan. A secured credit card is backed by a deposit you make, and your spending is limited based on how much you deposited. For secured credit-builder loans, you deposit money into an account and borrow against it, and then make payments to the bank.
Have someone add you as an authorized user. If you’re close with someone who has good credit, ask them if they’d be willing to add you as an authorized user to a credit card. You’ll be able to use the card, and the card’s payment history will appear on your credit report.