What Are Signature Loans With No Credit Check?

A signature loan with no credit check is easy to qualify for and doesn’t require collateral. But these loans are often payday loans masquerading as traditional personal loans, and they can leave you in a worse financial position than when you started. 

Consider a more affordable alternative, such as a lender that specializes in personal loans for bad credit.

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What are signature loans with no credit check?

In most cases with a signature loan, your credit score is important, as lenders use it to judge how likely you are to repay the loan. Your signature serves as a promise to repay the loan, and usually serves as a substitute for collateral. Signature loans still require credit checks, however, and not requiring one is a sign of a payday lender. These lenders allow you to borrow money without an inquiry on your credit report, but this is ultimately a sign of predatory lending.

Because there’s no collateral or credit check required for these loans, a payday lender has little guarantee that you’ll repay the loan. As a result, many charge up to 400% APR to compensate for that increased risk. 

How to qualify for signature loans with no credit check

When a loan doesn’t require collateral or a credit check, the lender must find a different way to confirm that you’re able to repay the loan. 

Signature loans with no credit check usually require a verifiable source of income. To prove you have income, you’re typically asked to provide recent pay stubs or tax documents. You may also be able to use income from something other than a job, such as Social Security benefits, alimony, and more.

In addition to proof of income, signature loans with no credit check have other basic requirements, including that borrowers be at least 18 years of age, with valid identification and an active bank account. But again, these types of loans should be avoided as they typically require repayment in two weeks and they charge $10 to $30 for every $100 borrowed.

Payday loans vs. traditional personal loans

Most personal loans, like signature loans, are unsecured, meaning you aren’t required to provide collateral to qualify. But unlike signature loans with no credit check, most traditional personal loans do involve a hard inquiry.

• Traditional personal loans: Because traditional personal loans run a credit check, there’s less risk to the lender. These loans are less predatory and more affordable. Your annual percentage rate (APR) — the interest rate plus fees — is based on your credit score, but rates don’t usually exceed 36% for top lenders. You may be charged fees, but they are usually less than on no-credit-check loans. Additionally, you’re typically given up to seven years to repay your loan.
• Payday loans: Loans without a credit check can have APRs as high as 400%, as well as late fees or returned fees. Additionally, if you don’t have the funds in your account when a lender attempts to access your funds, you may be charged with a nonsufficient funds fee by your bank. These high costs, as well as very short repayment terms, often lead borrowers into a cycle of payday lending where they must borrow another loan to repay the original one.

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Pros and cons of signature loans with no credit check

Signature loans with no credit check have some appealing qualities and are easy to qualify for, which is why so many people turn to them. But they also have some major risks and disadvantages.

Pros

• No collateral: Signature loans with no credit check don’t require collateral, meaning you can qualify without significant assets.
• No credit check: There’s no credit check required when you apply for this type of loan, meaning you can qualify no matter what your credit profile is.
• Easy application and approval: Unsecured no-credit-check loans tend to have a quick application and approval process, and are easy to qualify for.
• Fast funding: You can generally get the money for a no-credit-check unsecured loan the same day, especially if you visit a payday loan or cash advance storefront.

Cons

• High rates and fees: Signature loans with no credit check are typically payday loans, which have rates and fees that can amount to roughly 400% APR.
• Short repayment periods: You must usually repay this type of loan within a matter of weeks, compared to the years you have to repay a traditional personal loan.
• Often lead to a cycle of debt: Many people get trapped in a cycle of debt where they must take out additional high-interest debt to pay off their original loans when they come due.
• May require bank account access: Payday lenders may require access to your bank account for automatic withdrawals, regardless of whether you can afford the payments.

Managing a payday loan

If you have no other options available and decide this type of loan works for you, here’s what to consider:

• Shop around for the best rate: These loans tend to have predatory APRs, so it’s important to shop around for the best rate possible. Consider that for a 24-month personal loan for those with bad credit, the average interest rate is 33.97%, according to Credible data. Payday lenders often charge up to 400%.
• Run the numbers: Before you agree to a loan, make sure to judge whether the payment or payments would fit into your budget. You’ll want to make sure you can pay off the loan by the end of the two-week repayment period.
• Read the fine print: Before signing your loan agreement, read the fine print to learn about any hidden fees such as late fees and prepayment penalties.

Alternatives to signature loans with no credit check

When possible, it’s best to shop for alternatives. Even if you have bad credit, there are likely other options available to you.

• Bad-credit personal loan: There are plenty of lenders that require credit checks that still lend to borrowers with bad credit. Though your APR will likely be on the higher end of their range, it won’t be nearly as high as payday loan rates.
• Payday alternative loan (PAL): The National Credit Union Administration allows credit unions to offer payday alternative loans to their members. These loans are for small amounts and must be repaid within one to six months.
• Cosigner loan: If you have a loved one with good credit, consider asking them to cosign your loan. When you have a cosigner, the lender can consider both borrower’s credit profiles to help increase your chances of qualifying. But keep in mind that your cosigner will be on the hook for making payments if you’re unable to. 
• Secured loan: A secured loan requires collateral, such as a financial account, vehicle, or home. There are several types of secured loans to choose from, including secured personal loans, home equity loans, home equity lines of credit, and more. Just keep in mind that, if you don’t make your payments, the lender can seize your collateral. 
• Friends and family: Your loved ones likely don’t want to see you fall into a cycle of payday borrowing. If you have friends or family with the means to do so, ask if they’d consider giving you a small, short-term loan to help you get back on your feet. Just make sure to get the terms in writing and carefully stick to your repayment plan to preserve the relationship. 
• Local nonprofit organization: If you’re in a truly dire situation, consider looking at local nonprofit organizations. They may be able to help with everything from paying your bills to keeping food on your table during a financial rough patch. You can also call 211 for help with your bills or other financial issues.

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