Unsecured Personal Loans with No Credit Check

People seek personal loans for the sake of making home improvements, consolidating debts, meeting household expenses, paying medical bills or for taking a much desired vacation. In other words, a personal loan is not availed for undertaking commercial or business activity. Depending upon the needs of the borrower and his/her ability to provide a collateral, the consumer has the option of availing either a secured loan or an unsecured loan. The following write-up discusses the advantages and the pitfalls of unsecured personal loans with no credit check.

Defining Unsecured Personal Loans

Unsecured personal loans are generally meant for borrowers with good credit scores and credit history since these loans are not secured with a collateral. In other words, if the borrower defaults, the lender cannot hope to recover the defaulted sum by confiscating the collateral. Since the risk involved is high, banks and credit unions typically verify the credit worthiness of the borrower before dispensing the required sum. However, people with poor credit can still hope to avail an unsecured personal loan by approaching either a payday lender or a payday alternative lender.

Unsecured Personal Loans without Credit Check

Payday Advances
Payday loans are provided by lenders to sub-prime borrowers who hope to repay the loan with their paycheck. The borrower is expected to have a checking account that has been active during the last 3-6 months and provide the lender with a post-dated check. The consumer is entitled to receive up to 25 percent of his/her paycheck. The maturity period of the loan is 7-15 days and at the end of this period, the lender encashes the check assuming that the borrower has sufficient funds in the checking account. If the check bounces, the same gets reported to the ChexSystems and this makes it difficult for the borrower to open another checking or savings account. The lender may agree to postpone the collection and extend the maturity period by a few more days. However, this comes at the expense of an exorbitant rate of interest on the loan. According to the Consumer Federation of America (CFA), payday loans carry an APR (annual percentage rate) of as much as 430%. It would behoove the reader to note that, an unsecured personal loan from a bank has an APR of 7% while the APR on a standard credit card is around 12% assuming that the consumer has a good credit rating. High APR has the effect of trapping the consumer in a never ending cycle of debt.

No fax Payday Loans
In case of payday advances the borrower, who should be at least 18 years of age, is expected to fax a bunch of documents, viz. proof of age, address, identification, SSN (Social Security Number) or ITIN (Individual Taxpayer Identification Number) and pay stubs as proof of income. The borrower is also expected to have worked in the same company for the last 6 months and provide supporting document in lieu of the same. Thus, a possible breach of security may prove to be very costly for the consumer.

A number of lenders found an easy solution to this problem by providing fax less payday advances. The borrower is expected to fill out a simple application form that is processed by the lender in an hour, thus guaranteeing the consumer of hassle free cash advances. Since no fax payday advances are provided without the lender verifying even the basic documents, the rate of interest on these advances is usually very high.

Payday Alternative Loans
These loans are the best option for consumers with bad credit. Payday alternative loans are provided by credit unions to people who lack credit worthiness and have no collateral. The borrower is allowed to borrow up to $1000 and is expected to repay the amount within 6-12 months. The APR on these loans varies between 17 and 22 percent which is significantly lower than the APR on payday loans. Payday alternative loans may also include a savings component. In other words, if the borrower requires a loan of $250, the lender sanctions this amount and also deposits $250 in the borrower's savings account. The deposit earns interest and is held till such time the borrower repays the loan, thus allowing the consumer to establish a savings account and break out of the cycle of debt. These no credit check unsecured personal loans do not allow rollovers, i.e. additional loans are not sanctioned and neither is the maturity period extended till such time the borrower repays the original loan.

Thus, people who are interested in availing unsecured personal loans with no credit check should opt for payday alternative loans that are designed to help borrowers break free from the cycle of debt.