Is there there such a thing as no credit check loans in the UK? This question might be on the lips of anyone who has a less than perfect credit rating who is thinking about asking for a loan.
There is no specific loan with that title but there are loans available that people with poor credit ratings may be more likely to get approval for than others. Generally, when lenders talk about loans with no credit check they are referring to a payday loan. However, there are other options for loans for people with poor credit and these are a short-term loan and guarantor loan.
What Are Credit Checks?
It is important to bear in mind that all ethical UK lenders will want to make a credit check on you, regardless of the loan you are applying for. This may be worrying for you but it does not automatically mean that you will not be accepted for the loan.
If you are applying for a payday loan, the lender generally doesn’t undertake a full credit check. Instead, they may perform what is called a soft credit check. The difference between the two is that with a soft credit check, the lender does not delve too deeply into your past credit rating and with the hard credit check, they do.
Why a Credit Check Is Important To Lenders
A credit check is important to lenders, more so if you are asking to borrow hundreds of pounds and you want to spread the cost of the repayments over several years.
The credit check is made up of your prior financial history and this includes such as:
- Whether you missed any repayments;
- Were late with repayments;
- How much credit you owe;
- The number of credit accounts you have open;
- Any CCJs on your account.
By looking at the above information, they can tell how big a risk you might be when it comes to repaying the loan. Lenders are not going to want to hand out huge sums of cash if in the past you have failed to repay loans or you were always late with the loan repayments. This is not such a big worry if you are only applying for a small sum of money.
When you make an application for credit, whether you are approved or not, the application is noted on your credit file if the lender makes a hard credit check and remains there for around two years. To lenders making many applications for credit over a short time might look as though you are desperate to get hold of money. The soft credit check is not noted on your credit file.
Other Loan Criteria
Along with making a credit check, soft or hard, lenders will also want to know whether you:
- Live in the UK;
- Are aged 18 at least;
- Have a regular monthly income to repay the loan;
- Have a bank account in the United Kingdom;
- Have a debit card and can set up a direct debit for repayments.
The Payday and Short-term No Credit Check Loans
Two loans that people with a bad credit rating are more likely to find approval for include the payday and short-term loan.
Lenders usually do not put too much focus into your credit history as with both loans you are borrowing a relatively small sum of money and repaying the loan back quickly. The type of loan most suitable for your need is going to depend on the amount of money you want to borrow, and how quickly you can repay it.
The Payday Loan
The payday loan is the main type of loan that is referred to as being a loan with no credit check. Payday loan lenders usually offer sums of money anywhere from £100 to £500.
There are many advantages to taking out a payday loan, such as:
- The loan is quick to apply for online;
- The entire application is made online without paperwork;
- You know within minutes if you are approved;
- They are a good choice of loan to cover emergencies as money may be paid into the bank on the same day, often within hours;
- The loan is not hanging over your head for years.
The payday loan is repaid over one to three months. The lender will want to find out when you are paid, so you will have to calculate the paydays and enter them at the time of applying. If you only want to borrow for a month, the cost of the loan and any fees and interest is taken out of your bank on the day you are next paid. If you are spreading it out over three, it comes out of three paychecks but more interest is added on. With this in mind take a payday loan out for as short as possible but do not leave yourself short of money when payday comes around.
A payday loan can be a good way of getting your hands on money when you need it fast if you find you need money and your next payday is some time away. Usually, financial emergencies crop up when they are least expected. For example, you might:
- Have gone away on holiday and lost your wallet and do not have enough funds in the bank to cover spending money;
- You could have forgotten that you need to pay for that item you put a deposit down on and don’t have the cash to do so until next payday;
- Your car might unexpectedly break down or get a flat tire and you need cash to mend it;
- A large final demand bill needs paying but you forget to budget for it and now it’s due.
Essentially a payday loan can be taken out to cover any of the financial emergencies above, and more. You could apply and have the money paid into your bank account within hours if you are approved. This could make the difference between a ruined holiday and enjoying it, having to go on public transport and meeting the costs, losing out on the item you put the deposit down on or falling into debt because you cannot pay the bill and you will face fees and charges.
The Short-term Loan
A short-term loan is another popular type of loan that people with poor credit apply for as it is also repaid quickly when compared to other loans.
Again, as with all loans, you will have to undergo a credit check, but the lenders we work with also consider your circumstances and ability to repay the loan. This means they will look into how much money you have coming in each month and what your outgoings are. If they think you have enough money left over to cover the loan repayments along with your living expenses, they may approve the loan regardless of your credit score.
With the short-term loan, you might be able to borrow between £500 and £1,000 but this is going to depend on the lender and your circumstances. The loan is repaid for up to 12 months. Some lenders may offer you a long repayment period.
We can help to match you up with lenders who offer affordable loans with competitive rates. You can find a loan from a panel of lenders by only making a single loan application.
Other Choices of Loans for Poor Credit
The two loan choices above are the most popular choices for people who have a poor credit rating as they involve smaller sums of money and the loans are repaid back quickly.
However, they are certainly not the only two options available to you. You might also want to consider a guarantor loan or secured loan if you want to borrow up to £5,000 and spread the repayments for up to 36 months.
Guarantor loans are perhaps the best chance of approval for anyone with a bad credit rating. This is due to the fact that someone, usually a good friend or relative, stands as your guarantor. A guarantor means that they will state they will take over the repayments of the loan to ensure it is paid off if you cannot do so. This lessens the lender’s risk.
A secured loan might be offered to people with an extremely bad credit history if they want to borrow a large sum of money. This minimises the risk to the lender as if you fail to repay the loan the lender can apply to the court to take whatever you have secured against the loan, usually something of extreme value.
There are options for no credit check loans and the most suitable would be dependent on your circumstances and the amount of money you needed to borrow. We can help you to find a suitable loan by making one application to search with a panel of lenders.