Many lenders in the UK offer loans to their customers that do not require a credit check. These loans can help you out in a situation where you need money immediately but have a poor credit history. In this article, we are going to discuss different types of No Credit Check Loan, their advantages, and the risks associated with them.
Types of No Credit Check Loans
There are various types of emergency and short-term loans available in the UK that you can get with a bad credit rating. These loans include secured loans, title loans, payday loans, and pawnshop loans. Here is a brief description of each of these no credit check loans.
- Secured Loans
A secured loan uses an asset of the borrower as collateral. This collateral could be a vehicle or real state property that offers the security of repayment to the lender. Remember, not every secured loan comes with no credit check availability. Instead, most of the lenders offer no credit check option with only those loans which have a relatively higher APR.
- Title Loans
Title loans work almost in a similar manner as secured loans do. However, title loans are different in one way that a direct lender uses your new vehicle or home as collateral. The lender will repossess the vehicle or home and sell it to some other customers if you fail to make timely payments.
- Payday Loans
A payday loan or cash advance is one of the most convenient options to get an emergency loan for the short term. These loans mostly come with only a 30-day repayment term and use your next paycheck to back the loan. The payday lender will take possession of the collateral paycheck if you default on the loan repayment.
- Pawnshop Loans
A pawnshop loan is another convenient option to get a loan with a low amount. You can bring in your valuable items such as a piece of jewelry or an electronic device to your nearby pawnshop. The pawnbroker will give you an emergency loan based on the value of these items. They will keep your items permanently if you fail to repay the loan in the agreed term.
- Instant Cash Receiving
No credit check loans may be your only option when you need an emergency loan but have a low credit score. You can get cash instantly with most of the no credit check loans as these loans have collateral backing. Some lenders charge a loan origination fee upfront with a no-credit-check loan.
- No Credit Check Loans Limitations
No credit check loans come with a low loan amount, short repayment term, and high-interest rate. You can borrow only a small amount of money with no credit check loans. A no credit check loan can help you in a financial emergency but could not be a long-term credit solution.
Lenders charge interest at a very high rate with no credit check loans. You may end up paying more than the original loan amount with a payday or another short-term loan. You can also lose the collateral associated with a secured loan if you default on loan repayment. Lenders offer short repayment terms with no credit check loans, mostly a few weeks or months.