No Credit Check Loans - Forget About It
If you're not familiar with this type of financing, that's because it doesn't really exist anymore. But you can still find a lot of websites offering loans with no credit check required. The idea here is that, in theory, you can walk into the office of a financial company and qualify for some type of loan with no credit check whatsoever.
However, if you've been watching the news lately, you'll realize that this type of business model is becoming a thing of the past. In fact, risky loans made to unqualified borrowers is one of the primary reasons our economy is in such terrible shape today. Because of this, the qualification criteria for most types of financing has become stricter. For example, in order to get approved for a mortgage loan in today's economy, you'll need a good credit score, a sufficient down payment, and a favorable debt-to-income ratio -- more so than in the past.
Some, like myself, would argue that this is the way it should be. Lending standards and criteria are good things, because they protect the credit markets from excessive default. This is where credit scores come into the picture. While it's not the only criteria needed to get a loan, this score does offer a degree of insight into a consumer's financial responsibility (or irresponsibility).
For all of these reasons and more, no-credit-check loans are scarcely available today. Let me rephrase that statement. Legitimate loans are not available without a credit check process. If somebody offers you a no-credit-check loan in today's economy, it should set off warning alarms in your head. It's probably either (A) some form of payday loan in which you'll be gouged by incredibly high interest rates, or (B) some kind of scam designed to take advantage of desperate / unqualified borrowers.
Legitimate lenders will check your credit before lending you money. This goes for personal loans, student loans, mortgages and other types of financing. It's a sign of our times, and it's a truth that modern consumers must accept.
Fix Your Credit to Get a Loan
The no-credit-check loan is not a financial solution. It's a symptom of a bigger problem. In most cases, it means the borrower is trying to avoid a credit check because his or her financial history has resulted in a bad score.
We all have mistakes in our past, so I don't plan to get up on a soapbox and preach. Instead, I'm simply going to offer this piece of advice. If you want to achieve financial success in the new economy we now find ourselves in -- and you hope to qualify for some kind of loan in the near future -- you need to build a good credit score first.
From the mid 1990s until a couple of years ago, there was a lot of emphasis on "creative financing" methods to extend credit to anyone. These were the days of easy lending and easy credit: Every should qualify for a mortgage loan, we just have to find creative ways to make it work! This is also the period when the no-credit-check loans and subprime mortgages came into fashion.
And look where this financial laxity got us. Record-breaking numbers of home foreclosures swept across the United States, as millions of homeowners defaulted on their mortgages. Property values plummeted. The housing market collapsed. Our economy as a whole collapsed. Thousands of business have failed across the country. Unemployment rates have spiked. And phrases like "toxic assets" have become household terms. Nearly all of this can be traced back to the days of easy credit and lax lending.
As a result of all this (and we still haven't seen the bottom yet), we find ourselves in a new economy where stiff lending criteria are back in style. This is why a good credit score is so important. The days of no-credit-check loans are behind us. So people with low scores, excess debt, and other financial problems will find themselves with very few financing options.
What can you do to prepare yourself for this "new world"? You can start improving your financial picture. You can reduce your debt and improve your credit score. In addition to helping you obtain loans in the future, these types of positive changes will improve your quality of life overall.
On this blog, and also on our parent website, you can find hundreds of tips on how to accomplish these goals. Here are a few I recommend starting with:
Conclusion and Going Forward
No-credit-check loans are hard to come by these days. They are usually a scam in disguise. If you are seeking this type of loan, it's a symptom of a bigger problem that needs to be addressed. Qualifying for financing is much harder today than it was five years ago. Lenders are going to scrutinize every aspect of your financial background, and that includes your credit score.
Financially speaking, the best thing you can do for yourself in the new economy is to reduce your debt and improve your credit score. You'll qualify for better loans with better terms if you can do those two things.
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posted by Brandon at
9:54 AM
