You may have heard about no credit check loans and wonder what they are. You might even be rather confused as the government in the UK does state that all lenders should do a credit check on borrowers. Therefore, you may wonder whether these companies are no heeding advice or whether they are just poorly named.
It would seem that the loans are actually poorly names as credit checks are carried out. However, the reason for this name is so that people who have a poor credit record need not be worried about applying. With many loans, if you have a poor credit record, you will be turned down for a loan. Then if you do get turned down, this get recorded on your credit record and you are even more likely to be turned down by the next place you apply to. This can lead to it getting harder and harder to borrow money. However, with a ‘no credit check’ loan, they will not use your credit rating as a reason to turn you down. Therefore, that is why the loans are named this way. The lenders hope that it will allow those people that have a poor credit record, to realise that there is a chance that they will be accepted for this loan because they will not be judged based on their credit rating. The credit check is used to check things such as the age, residence and income of the borrower as they will need to be over eighteen, live in the UK and have a regular income.
Types of loan
There are actually quite a few different loan types that fall into the category of no credit check loans. It is good to find out more about each type so that if you are considering this type of loan, you will know which might be the best one for you. A few examples are listed below:
- Payday loan – this is probably the most well-known. You will borrow a small sum of money (usually a few hundred pounds) which you repay in full when you next get paid. The loan tends to just last a few weeks.
- Instalment loan – similar to a payday loan but you repay the loan over a series of months (or longer) so that the repayments are easier to manage and the loan will last longer.
- Guarantor loan – you can borrow larger amounts (usually thousands of pounds) but you nominate a guarantor with a good credit rating who will cover any repayments that you miss.
- Logbook loan – you use your vehicle as collateral and repay in stages but if you miss a repayment your vehicle could be repossessed and sold to repay the loan.
These are just a few examples and new types of loan are appearing frequently so it is wise to do your own research to find out what is available so that you are aware of what you have to choose from.
These types of loans have other advantages as well as being available for borrowers that have a poor credit record. This could mean that they may also appeal to borrowers that do have a decent credit rating. For example, they are very fast to arrange. This means that if money is needed really quickly then the loan could provide it. This could be quicker than arranging any other type of loan, so it could be better in an emergency that other types. Some no credit check lenders are also available to give out loans outside of normal office hours which can be really useful as well. You may be able to borrow smaller amounts than with traditional loans which could mean that you will not have to worry about borrowing such a large sum of money. This could be particularly advantageous to anyone that does not like being in debt or does not need to borrow very much money.
It is good to make sure that you know about all of your borrowing options. You never know when you might need to borrow some money and if you can make a choice form all loan options then this will give you a better chance of finding the perfect loan for you. We will not all need the same type of loan and even if we have borrowed before we may have used a different type of loan then. Depending on how much we need, what we need it for and how long for we will choose the relevant loan for us. We have a much better chance of finding the right match loan wise, if we know exactly what loans will be available for us to choose from. It is important to find the right loan as it will mean that we will have a much more positive borrowing experience as a result.