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Everyone stumbles on a hard time, and we can’t be prepared for everything in life. Sometimes when life is not going according to our plan, we need a backup option. Especially when it comes to our finances. In case you are obtaining a loan for the first time, getting approved wouldn’t be easy. Or if the emergency comes up, those who don’t have a strong credit history are often in need of a loan for bad credit. There is no guarantee you will be approved for a loan with bad credit or without credit history at all. Bad credit may prevent you from getting a loan. Not only does a bad credit score make it more difficult to obtain a loan from a traditional lender like a bank, but also no history affects negatively being approved.
Good news! There are some loan options for Canadians without a credit history. For those who are dealing with a bad credit history, no credit check loans may help.
What is a bad credit score?
As the saying goes, past behavior is the best indicator of future behavior. That being said, your credit determines your creditworthiness. Your credit score indicates the quality of your credit history. Credit history tells a lender how you’ve handled debt in the past and helps them determine how likely you are to repay a new loan. If you have bad credit, loans from a traditional bank are not accessible because it doubts your ability to repay a loan. A credit score is a number between 300 – 900, and the higher the score, the better. When your current score isn't that good, most lenders won't grant you a loan. Generally, if your score is lower than 500, your application will likely be rejected. Having a bad credit history makes a borrower risky for a lender. That’s why a credit score plays a critical role in determining whether lenders approve or reject your loan application.
A credit score in Canada is usually defined by the financial institutions TransUnion or Equifax. Both of them determine your score by several variables, such as payment history (shows whether you make your payments on time or miss them), debt levels (the amount you owe), debt variety (what types of debt you have), credit history, new inquiries (performance of “hard” credit check).
What are no credit check loans?
If you ever find yourself in a tough situation, like have not built your credit score yet or have recently received a bad rating, this isn’t an issue anymore. A lot of Canadians have financial problems when trying to qualify for loans due to bad credit history. Fortunately, banks and credit unions aren’t the only places for loan seekers anymore. If you want to avoid having your credit score checked, you can do it with no credit check loans. No credit check loans enable Canadians to qualify for any loan regardless of their credit score. These types of loans are money loans without a credit check, where the approval is based on your current income and not on your history. No credit check loans are short-term loans that are designed to help you access funds when you need more cash to cover unexpected expenses.
Applying for a no credit check loan, it does not matter if you have a poor credit score. Some lenders can provide you to get a loan without checking your credit score.
Lenders who offer no credit check loans won’t take into account your credit score, instead, they will require you other documents that can prove your eligibility. Therefore, no credit check loans are beneficial, especially for those who are unable to maintain a good credit score.
Pros and cons of no credit check loans
Being more accessible, no credit check loans may seem a good option. But let’s take a look at their advantages and disadvantages.
Pros
Borrower’s credit score is of no importance, so lenders won’t look into credit history;
The loan application process is much faster;
Approval decisions are released in just a short time;
Appealing to people with no credit history or poor credit.
There are usually no prepayment penalties or fees for early payments;
There are fewer requirements.
Cons
These loans may carry extremely high-interest rates (sometimes 300% – 500% APR) ;
There can be hidden fees;
There can be a limit to the amount of money the borrower can get;
You may need a suitable guarantor to apply;
Repayment terms are generally very short, about 14 days;
More possibility of scamming due to a lack of regulations.
The best part about no credit check loans is that they do not impose tight requirements. They use other ways to prove the borrower’s creditworthiness. Another good thing about a no-credit-check loan is the easy and fast approval process. But this type of loan may come with risks, including high-interest rates and short repayment terms. In the event of missing payments, you could end up with damaged finances. The main drawback of no credit check loans is that they may be prone to scams. The interest rate will depend on the borrower’s financial profile and varies on a lender-by-lender basis. The penalty fees will be higher, and the lender may add interest. All in all, the downsides make these loans less affordable.
Because of these risks, you should only get a bad credit loan from an institution you can trust, one that has taken the time to design a repayment term (and loan size) that makes sense for your financial situation. Before applying for any credit product, conduct your research, compare lenders, look them up in the Better Business Bureau database, and find out their customer reviews.
What is a credit report?
A credit report is a summary of how you have managed credit accounts. A credit report contains personal information, credit account history, credit inquiries, and public records. A credit report shows your credit score that ranges from 300 to 900. This rating, which depends on the quality and age of your credit history, is used by traditional banking institutions to grant you a loan and offer you a more or less attractive rate. With a score below 500, you will have a better chance of having your loan application declined.
It also may include other information that’s reported to credit bureaus by your lenders and creditors. Potential creditors and lenders use credit reports as part of their decision-making process to decide whether you qualify for credit — and at what terms. The process when a lender requests a borrower’s credit history from a credit reporting institution is called a credit check. It's important to check your credit reports regularly to ensure the information in them is accurate and complete.
Major types of no credit check loans
There are several types of loans that you can access by applying with some lenders without a credit rating:
A payday loan is a short-term loan that is often tightly regulated. These loans are usually a small amount of money in the range of $100 – $1,500 that should be repaid within a short period of 14 days or on your next payday. This type of loan is really fast and easy. To receive funding, you have to wait only several days, usually, you can get same-day approval. However, payday loans are also risky. Note that a payday loan may contain high fees that make it a very expensive way to borrow money. Try to avoid payday loans unless you like playing with fire.
Many lenders offer personal loans. These loans have extended repayment periods, as well as more reasonable interest rates. There are two types of personal loans in Canada. The first is secured personal loans. It’s a loan that’s required collateral or security in the form of an asset (car, home, or another piece of property). The second type is unsecured loans which are not required collateral. Approval will depend on the information about your financial standing.
Private loans are a type of funding that is provided by private individuals, private lenders, or small businesses. These loans are usually smaller than personal loans, but larger than payday loans.
A guarantor loan involves a person who can “guarantee” that your payments will be made on time. This form of security assumes a cosigner will be responsible for your loan in case of default.
Car title loans are the type of loans where you can offer your vehicle as collateral in exchange for better loan conditions. In this case, you may have more rights to receive a more profitable loan without credit checks. But your lender will have ownership of the car until you complete your payments, and will have the right to sell it if you fail to meet your obligations.
How to apply?
First, review your finances by increasing your chances of being approved. Try to get rid of as many debts as you can and increase your income.
To get started, find the right lender by researching what different lenders offer.To find out the best possible offers, compare the lenders and find one that offers fair interest rates and repayment terms. And always look out for reviews and ratings.
When you have decided on the lender, the next step is to examine the options that the lender offers and select the services that best suit your needs.
Then submit your application to the lender. You can either apply online or do it with a storefront lender. When dealing with online lenders, it is usually a simple online application with fast approval that will take only a few minutes. The entire process can be done online at your convenience. To apply for a loan, you will be asked to provide information about your employment, and bank details. Requesting an online loan, state the amount of money you would like to borrow and enter your personal information including first and last name, email, mobile phone, address, and income information. Only provide your information to trusted sources and be aware of online phishing scams and the risks associated with them, including identity theft and financial loss. In the event you cannot apply online, other lenders offer physical locations where you can apply in person.
After filling out your application, wait for the approval. Online applications tend to be processed quickly, and you may even find out the same day.
The lender may also require to provide other documents. You’ll need to supply any requested documents.
If approved, you need to sign the loan agreement. It’s crucial to know what the terms and conditions are before they have your signature on the contract. Once you sign the funds will be transferred into your bank account. In most cases, money is directly deposited into your account. A no credit check loan may only take one or two days to be approved and deposited.
Main requirements
If you need some urgent financial help, having a poor credit history will get it more difficult for you to obtain a loan, as lenders check your credit history to determine your creditworthiness and ability to repay a loan. Fortunately, no credit check loans have easy eligibility criteria. The minimum amount should be required to qualify for a no credit check loan. Most lenders need to confirm that you’ll be able to afford your payments, interest, and fees, so they don’t check your credit as part of the application process.
Although, requirements may vary from lender to lender.
Most lenders only approve applicants that are Canadian citizens;
It is necessary to meet the minimum age requirement which is above 18 years old (or 19 years old in some provinces);
Most lenders require to be employed and have a stable income. Lenders will ask for documents showing you have an active bank account and records of your employment (or other income sources);
The borrower needs to have a bank account and provide recent bank statements to prove the income;
To verify your personal information, you will be asked for a valid piece of Government-issued photo ID, such as your driver’s license and passport;
The lender may also inspect your guarantor’s finances and/or any collateral you’re offering.
To sum up, no credit check loan providers evaluate borrowers based on employment stability, income level, and the ability to repay the debt. As such, to be eligible for a no credit check loan, you’ll need to have a steady income with a reasonable debt-to-income ratio. Lenders usually verify this information through references, bank statements, and paystubs.
Ways to get a no credit check loan
One of the most effective ways of building or rebuilding credit history is by getting a Canadian credit card which is quite easy to get approved for. Secured credit cards are a popular choice among those with bad credit, as they report to credit bureaus and allow you to build credit while you use the card. Note that they require an upfront deposit as a safety measure.
In addition, store credit cards are often used to rebuild credit as they typically come with no annual fee and will accept applicants with lower credit scores.
Online personal loans are another form of no credit check loans that are aimed to help pay off debt or cover an unexpected emergency.
Payday loans are designed for those with poor credit who only need quick funds - often about $1,500 or less. The usage of these loans varies from rent to unforeseen bills of all kinds. These are unsecured loans that are appealing to many because they are easy to get. Instant approval makes them attractive in an emergency.
Same day loan is another form of a short-term loan. Most same-day loans are designed for Canadians with bad credit situations. As long as you can prove that the loan is something that fits into your budget, you should be good to go.
Another option for people with bad credit is a quick cash loan. They are offered within the $500 to $10,000 range. Cash loan still provides money quickly but offer extended repayment term.
Bad credit car loans are similar to a bad credit personal loan, but it’s restricted in their use to car-based payments, such as repairs.
Legal regulations
Loan regulations vary between provinces and territories. As a borrower, you need to be aware of the regulations in your province or territory so you can make sure your loan has the right terms and fees as dictated by the government. There are federal and provincial government rules that prohibit lenders from charging illegal rates. One of the main costs for considering is the annual percentage rate (APR) or the fee that is charged for borrowing money. In all provinces, regulations restrict the maximum fee a lender is allowed to charge – and the fee is typically shown as both an APR as well as a dollar amount per $100 borrowed (e.g. $15 fee per $100 borrowed).
Legal sources regulating no credit check loans include:
The Trust and Loan Companies Act sets the framework for clarity of agreement, readability of text to prevent lenders from hiding information from borrowers, and transparency of repayment terms and loan costs.
The Criminal Code of Canada contains important protections for borrowers: lenders are prohibited from charging criminal interest rates.
In Ontario, British Columbia, Alberta, New Brunswick, and Prince Edward Island, payday lenders can charge a maximum of $15 for every $100 they lend within two weeks.
In Manitoba and Saskatchewan, the maximum fee is $17 per $100, or 443 percent per year. In Nova Scotia, payday lenders are allowed to charge even more: $19 per $100 (495 percent per year). Lenders in Newfoundland and Labrador can charge $21 per $100 (548 percent per year).
Quebec is the only province that has effectively banned payday loans. Interest rates on all loans in this province are capped at 35 percent.
Make sure you know the total cost of a loan before you borrow the money based on your province or territory of residence.
How to repay a no credit check loan?
The standard arrangement will be automatic withdrawal from your bank account. Most companies will debit your account according to your loan payment schedule. Always pay attention to your loan contract and make sure to check the dates.
The real cost of a no credit check loan
The total cost will be equal to the loan amount plus any additional fees. No credit check loans carry higher rates than the loans that require a good credit score. Most loans that are provided without checking credit history are necessarily going to have higher interest rates (sometimes called “subprime” rates) than the rates you might see given out at a large, multinational bank. You will pay the equivalent of around 120% to over 390% APR on payday loans. Keep in mind that It’s easy to get caught in a cycle of debt.
