How to Find a No Credit Check
Personal Loan
In the United States, the legal system is
built around the philosophy of "innocent until
proven guilty." That is, a person is presumed innocent
until evidence is produced that explains beyond a shadow
of a doubt how that person is guilty of committing a
crime. In the world of personal loans however, the opposite
is true, and consumers are considered guilty until they
are proven innocent. Banks cannot assume that a particular
customer is creditworthy enough to trust with their
money, so that person must prove his/her "innocence"
by submitting to a credit check, which is evidence that
the person has a good history of meeting financial obligations.
But what about a person with bad credit who is applying
for a personal loan? Certainly, that person doesn't
want a credit report pulled, as it is information that
is detrimental to the borrower's case when applying
for a loan. Even if the customer has every intention
of paying off the loan in time and now has the means
to really do it, the past credit history is indication
that this person is a high risk borrower, and either
should not receive a loan, or should be subjected to
a higher interest rate to compensate for the additional
risk to the bank.
There is another way though, because although rare,
there are sources that will offer a no credit check
personal loan to people with bad credit nowadays. These
can be difficult to find because of banks' penchant
for protecting themselves and their assets, but these
sources of funds can be vital in a real emergency when
an otherwise good person has run into a string of bad
luck, and needs some quick cash.
There is one caveat to this loophole in the normal
system of applying for personal loans, however. By going
for a no credit check personal loan, the applicant is
almost admitting that he/she has bad credit, and is
resorting to this type of loan because every other option
has been eliminated. The idea is this; people with good
credit generally don't have a problem holding their
own credit records up for scrutiny, if they desire a
loan with good repayment terms. So, it is naturally
assumed that applicants for personal loans that do not
require a credit check are doing so because they feel
this information would be a detriment.
Because of this, a no credit check personal loan will
usually have a higher interest rate than a personal
loan that does require a credit check, to compensate
for the added risk to the lender. One way to reduce
this risk, and as a result reduce the interest rate
on the loan, is to sign over some sort of collateral
to the lender, whether it is equity in a house, or the
title to a vehicle. That way, the lender can recoup
its losses if the loan goes into default. Personal loans
of larger amounts will often require collateral anyway,
before they are approved. But although they are tougher
to find and the interest rates are higher, being able
to obtain a no credit check personal loan serves a valuable
purpose in the community, allowing people who have had
bad financial luck to get their lives back on track
again.
