No Credit Check, No Problem: You Can Still Get a Signature Loan

Signature loans with no credit check seem like a good idea in theory, but borrowing money this way can be far more expensive than other options. Because lenders have to make loans without the benefit of checking the applicant's credit score and knowing their borrowing history, these loans tend to be pricier than normal loans and with more fine print.

If you're considering a signature loan with no credit check, you should know how these loans differ from other funding options like traditional unsecured personal loans, in addition to how much more they may cost you.

Signature Loans With No Credit Check 

A signature loan is a type of loan that only requires your signature and promise to pay. They generally have lower rates than credit cards and higher rates than loans secured with an asset as collateral. Signature loans can include unsecured personal loans.

A signature loan with no credit check is essentially a payday loan with riskier terms. As with traditional unsecured loans, payday loans don't require collateral, yet interest rates on these loans can easily be over 400%—however, their interest rates can be capped by state law. Some states do not allow payday lending at all.

Signature loans with no credit check are also offered in much smaller amounts than typical personal loans, the best of which may offer up to $50,000 or even higher, depending on the lender. For payday loans, you're usually limited to borrowing $500 or $1,000, although some lenders offer loans for up to $10,000.

Finally, signature loans with no credit check may require you to pay back the money in a much shorter time frame, such as within two weeks or a couple of months. In contrast, traditional personal lenders often let you pay a loan off in 24 to 84 months.

Payday Loans vs. Traditional Signature Loans

Here's how payday loans compare to traditional personal loans based on several key factors.

Signature Loans With No Credit Check: Pros & Cons

Payday loans are expensive overall, so you should look for more affordable borrowing options. That said, there are a few reasons people use these loans.

Pros

• Get funding regardless of your credit score: Payday loans don't consider your credit score when approving you for funding, so you can get the cash you need even with poor credit or no credit.
• Few approval requirements: Other than being at least 18 years old, having a valid address and bank account, and providing proof of income, there are rarely other requirements.
• Solve financial problems in the short term: Payday loans can solve short-term financial problems like covering an unexpected expense, such as a medical bill or an auto repair bill.

Cons

• Expensive: With interest rates that can reach 400% or higher, payday loans are one of the most expensive ways to borrow money.
• Can create a cycle of debt: These loans are typically paid back on your next payday, and you may have to write a postdated check or agree to a bank transfer on a future date to secure funding. This can leave you with less cash to pay bills.
• No credit-building: As payday lenders don't usually report to the credit bureaus, making on-time payments on payday loans won't help your credit. That said, they will report you late payments, which will hurt your credit.

Are Signature Loans With No Credit Check Worth It?

Because of their expensive nature, signature loans with no credit check generally aren't worth it unless you have no other option. Almost any other loan type or credit card will put you in a better financial position and charge lower interest rates and fees as you pay the money back.

A few things to remember about signature loans with no credit check:

• You're typically only borrowing money for a few weeks or a few months.
• Interest rates can easily be 400% or higher during that time.
• Payday loans are typically meant to be paid off with a lump sum, so they're not a good long-term borrowing option.
• The loan company will want a postdated check or an approved bank transfer so they automatically get paid on your loan's due date.
• A range of hidden fees can apply, including late fees, returned payment fees, and more.

Alternatives to Signature Loans With No Credit Check

There are some alternatives to consider when you have bad credit and need cash fast. Consider these borrowing options if you find yourself in this situation:

• Payday alternative loans (PALs): Payday alternative loans (PALs) are offered through credit unions and provide a way for borrowers with imperfect credit to borrow $200 to $1,000. Loan terms typically range from one month to six months, and interest rates are much lower than you'll find with payday loans.
• Personal loans for bad credit: Some lenders offer personal loans for bad credit, although they do check your credit when you apply. Interest rates can be as high as 35.99% with these loans, and origination fees of up to 12% of the loan amount are not uncommon.
• Home equity loans: If you have fair credit and you have a considerable amount of home equity, you can use your home as collateral and get access to cash with a home equity loan or a home equity line of credit (HELOC). Just remember that using your home as collateral means you could lose it to foreclosure if you fail to repay.

Finding the Right Loan

Before you apply for a payday loan or any other loan, you should check your credit score and credit history to see where you stand. This step can help you figure out whether you can qualify for a traditional loan with decent terms, or if you could qualify for other financial products like a credit card. Some lenders also let you pre-qualify for a loan, which is when you get estimated terms you would qualify for without impacting your credit score.

Finally, for any loan offer you receive, make sure you understand the interest rates and fees. Additionally, avoid situations where you're borrowing money you don't need, and make sure that you have a plan to pay the money back.

The Bottom Line

If you've been looking for signature loans for bad credit and wondering how much they will cost you, you should know that loans that lack a credit check requirement can be expensive.

With that in mind, the best signature loans for bad credit are the more traditional kind that charge interest rates up to 35.99% and offer repayment terms that last up to several years. The tradeoff of these loans is that they do require a credit check, so if you have poor credit, you could be stuck with a higher interest rate or denied funding altogether.