Ask anybody in need for money with a negative credit score how hard it is to secure a loan. But in Canada, you can easily acquire a loan without a credit check. Getting approved for commercial or personal loans is no longer a challenge like some years back.
Today, companies can help you secure a loan even with bad credit. Lenders have devised other mechanism to see whether you can finance a loan without following a traditional credit score approach. So, if you need a loan without a credit check, lenders would require you to provide an alternative way you plan to repay the loan.
Credit Score Substitute
Probably you are wondering what a lender will require you to provide as an alternative proof of loan repayment. A lender will use another approach to verify your loan qualification through an assessment process or documentation.
If you prefer to work with lending companies that disregard credit score processes, here are the following alternatives you’ll need to provide for loan consideration.
Bank Statement for Verification
Some lending companies will require you to present your bank statements to help them ascertain the amount of money in your bank account and transactions you make within a month. The bank statement is required by lenders that do not offer loans based on credit ratings to verify that you qualify for a loan.
There are various ways to go through the process, but these are the most common tactic lenders use.
E-statements: It is easy to get e-statements from any bank and lenders can easily request your information using online banking portal certify whether you qualify for a loan depending on your financial readings.
Instant Banking Verification: Lenders can use several programs that provide (IBV) service. You must use a program that your preferred lender is using to login to your online banking and automatically capture a snapshot showing your account details to build a report. That report helps the lender see your financial information, but not your account information.
An alternative approach that you can use to verify your bank statements to the lender are sending a fax and the client will decide after from what they see.
Documents to Confirm Income
Another step lender would like to check to certify whether you qualify for a loan is your income. Many lenders may want you to repay loan regularly. However, they are most interested in people who make enough money and can repay the requested loan.
Collateral as Security
When you want to take a loan, but feel like your credit ratings may hinder you from acquiring a loan, you may provide collateral as a guarantee. Lenders do not bother to check your credit score when your loan is secured. Collateral reduces risks for lenders in providing you with a loan. And such type of loan agreement with a lender may easily secure your personal loan of $5000 or exceeding the amount.
Getting a Guarantor
If your credit ratings are bad and your income is not enough to secure you a loan without a credit check, a guarantor may help you to qualify for one. Remember the guarantor should have a clean credit history and a good income for the lender to approve you a loan. Also, the guarantor should be aware of the risk involved if you are unable to pay the loan.
The Pros and Cons of No Credit Check Loans
When planning to apply for a loan, perform research from lending companies and try weight the benefits or disadvantages of the loan you are about to take.
- The loan application is easy and fast
- No need to provide collateral since the loan is unsecured
- You successfully secure a loan even with a bad credit rating
- You can qualify for a loan even without employment
- The interest rates for unsecured loans are higher than the traditional type of loan
- When you default, the guarantor may be forced to clear the loan or put your asset at risk
- Lenders may fail to accept some guarantors
- You may part with extra fees
- You may fall to get lured to illegitimate lenders promising no credit check for loans
Are No Credit Checks Loans Safe?
While many lending companies promise credit loans without a credit check, you’ll find some predatory lenders looking for unsuspecting borrowers to trap them with an unending cycle of debt. That is why you should scrutinize your lender before you agree on anything even when their terms seem genuine. Before you take a loan, here are things to consider.
Term: Short term loans are not advisable because they require you to repay the huge amount of money. When you cannot pay, they can accumulate interest that is hard to repay.
Rate: Be careful not to take loans with high interest to avoid repaying more money on interest than the borrowed amount.
Eligibility: Many borrowers with bad credit ratings are looking for lenders in Canada to offer loans using alternative requirements. This type of loan may be dangerous for defaulters because lenders trap them in debt by taking them in circles.
Lenders That Won’t Check Your Credit Score
You are required to provide a credit check from traditional financial institutions or banks for any loan requests. Through credit checks, they can ascertain your creditworthiness. Check below the places where you can get approved for short term loans or a no credit check.
Private Lenders – They never follow strict guidelines such as the one used by traditional institutions or banks
Alternative Lenders – They mostly work online and help borrowers with low credit score to secure loans
Niche Focused Lenders – They are very specific about the borrowers to offer loans (e.g. title loan providers or private mortgage lenders)
Common Types of No Credit Check Loans
The types of loans that do not require a credit check to qualify are many. Here is the list of loans that do not require credit checks.
Car Title Loans
A car title loans require you to secure a loan using your vehicle as a security. The amounts of loan you get are small and are given depending on your vehicle’s equity. Usually the loan duration is between 3 months to 3 years, and the interest rates may rise to 60%. Guarantor Loans
Borrowers who have guarantors with them are not subjected to credit checks. But the guarantors must show their credit score before qualifying for a loan.
Payday LoansPayday loans have short repayment duration of around two weeks and attract very high up to 500% (APR). The loans range b