What is a Loan Without Credit Check – Benefits, Eligibility and How to Apply Online
Planning to get a personal loan but have a low credit score? In this situation, opt for loans with no credit check. The credit score determines a borrower’s ability to repay the loan amount within the repayment tenure. However low or no credit score can prevent the lender from lending you a personal loan.
So, how can you apply and get a personal loan with no credit check? Keep reading to find out!
How does a Loans with No Credit Check Work?
Usually, lenders check credit or CIBIL scores before approving a loan. However, with a no credit check loan, the financial lenders do not check a borrower’s CIBIL score. They disburse the loan amount without performing a credit check. Such loans are great for individuals with poor credit scores or who have never taken a loan.
As the overall risk profile of an individual increase with low credit scores, lenders offer this loan at a higher rate of interest. Additionally, small loans without credit checks require minimal documentation. Lenders might ask for only proof of income before sanctioning the loan.
Features of Loans with No Credit Check
- One can get this financial product without the need for credit checks.
- It comes with minimal documentation.
- Individuals can get an instant loan with no credit check as lenders take less time to approve it.
- These loans are generally offered at higher interest rates, though not as high as credit card debt. However, you do not have to pledge your personal items to secure this loan.
- Although the repayment tenure is short, borrowers can expect a flexible repayment period.
Benefits of Loans with No Credit Check
- You can access funds without a good credit history.
- Experience quick approval of loans.
- Obtain a sizable loan amount.
- Get flexible repayment tenure.
- Expect minimum documentation and paperwork.
- Secure loans without collateral. Therefore, there is no risk of losing your valuable possessions like jewellery or a house.
- Obtain loans at fixed interest rates.
- No credit score loans’ approval rate is higher than other loans. This will help in maintaining a good credit score in the long run. On the other hand, continuous rejection of loan applications can negatively affect the credit report.
Eligibility Criteria for Loan Without Credit Check
Here are the eligibility criteria that a borrower must fulfil to avail of loans without any credit check:
- Applicants must be a citizen or residents of India.
- The minimum age for applying for a no credit check personal loan is 18 years.
- Some financial institutions have a minimum salary requirement which varies from one bank to another.
- The applicant must either be salaried or self-employed.
- In the case of personal loans for business purposes, the business must be operating for a certain minimum period. This can be 2 or 3 years and varies from bank to bank.
- Individuals must have a stable flow of income and be in a position to repay the loan.
Documents Required for Obtaining a No Credit Score Loan
In India, banks and financial institutions do not offer any credit check loans. However, they do offer secured loans that can be availed by individuals with a bad credit history. Here are the documents required to obtain a secured loan:
- Proof of Identity like PAN card, voter ID card, etc.
- Proof of address like Aadhaar card, electricity bill, etc.
- Bank statements of the last 3-5 months.
- Salary slips of the last 3 months in the case of salaried employees.
- Proof of income for self-employed individuals.
- Original property documents in case of home loans.
Ways to Get Loans with Low Credit Score
- One can improve their credit score by making timely repayments. However, securing a no-credit-check loan from a reputable lender is easy to meet emergency fund requirements.
- Potential borrowers can seek alternate lenders who check basic eligibility to grant a loan.
- Individuals with a low credit score might want to settle for a low loan amount as it offers convenience during repayment. In this regard, they can also apply with a co-applicant.
- Finally, one with additional sources of income can apply for a loan with a low credit score.
Alternatively, potential buyers can opt for a high-quantum cash loan from lenders such as Navi. One can avail of loans up to Rs. 5 lakh and get instant approval and credit to bank accounts. Download the Navi app to effortlessly enjoy a paperless loan application procedure and meet your fund requirements.
Example of a No Credit Check Loan
Indian banks do not offer the facility of no credit check loans. However, individuals who do not have a high credit score and are in urgent need of money can always opt for a secured loan. To avail of a secured loan, the borrower will have to offer something as a mortgage to the lender. This acts as collateral which will be given back by the lender after the repayment of the entire loan. Some examples of secured loans are loans on cars, homes, fixed deposits, etc.
Factors That Affect No Credit Check Loan Approval
- Job stability: Individuals with a stable job and constant income flow have a better chance of getting their loans approved.
- Employment at listed companies: Some companies are listed by financial institutions as the employers associated with these companies pay their employees on time. As a result, individuals belonging to such companies stand a better chance of getting a loan without credit checks.
- Age: Younger age groups are more prone to job changes that affect their job stability. This, in turn, affects their loan approval.
- Prepayment: One can opt for loan prepayment by paying their loan amount before the due date. By prepaying their loans, borrowers leave a positive impression on the lenders, making it easier to get approval.
Disadvantages of Loans with No Credit Check
The following are some of the disadvantages of no credit score loans:
- The lender sets the loan terms, and as a borrower secures this loan without any collateral or credit check, the terms are usually in their favour.
- These loans come with higher -interest rates. Thus, it might increase a borrower’s loan EMI amount.
- A no credit check loan is a short-term loan that comes with short repayment tenure. Consequently, an applicant’s EMI burden might increase.
Final Word
You should ideally maintain a good credit history by avoiding defaults to secure loans such as personal loans and more. However, individuals with a poor CIBIL score also stand a chance at availing of finances, thanks to loans with no credit check. These are an ideal financing solution for those who require funds urgently but do not possess a high credit score.
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FAQs
Ans: One can avail of no credit check loans on the basis of a line of credit that has been extended already (for instance, a loan against a credit card balance), against the words of a guarantor (in the case of education loans), or in lieu of security (for example car loans). Thus, your credit history does not have a role to play in the eligibility process for this type of loan.
Ans: The eligibility criteria for no credit check loans are:
An applicant must be an Indian resident.
He or she should be at least 18 years of age.
Some lenders sanction loan amounts only after checking the minimum salary required for this application.
Salaried, non-salaried and self-employed individuals can apply for this loan.
Self-employed individuals with a business must have business continuity for at least 3 years to apply for this loan.
Individuals securing this loan must be in a position to repay the amount in time.
Ans: Borrowers should consider the following points while applying for loans without a credit check:
Consider going through the offer document before applying for these loans.
Loan amounts are generally less.
There is no need for collateral for availing of this kind of financial product.
Interest rates are high.
Prepayment of a loan increases the loan approval rate.
EMI for these loans can be found by using an EMI calculator.
Foreclosure and processing charges are a consideration during no credit check loan applications.
Ans: You can contact small finance banks (SFBs), non-banking financial companies (NBFCs), and microfinance banks (MFBs) to get an overdraft facility and apply for secured loans from recognised financial lenders. Moreover, you can get assistance from peer-to-peer lending. These are the few ways by which a borrower can secure business loans without a credit check.
Ans: Yes, cooperative banks and private lenders provide car loans without a credit check. However, individuals might want to consider certain factors before applying for such a loan. Such factors include interest rates which are generally high for these loans.
Ans: Yes, credit score plays a crucial role in securing a loan. They are one of the important factors that banks and other financial institutions analyse while considering a loan application. The better the credit ratings, the more are the chances of loan approval.
Ans: Lenders in India do not provide the facility of no credit check loans. Additionally. unsecured loans are usually approved for borrowers who have good credit ratings. Therefore, individuals who have a low credit score can opt for a secured loan. A secured loan comes with low-interest rates, longer tenures and favourable terms of repayment.
Ans: If you are defaulting on your loan repayments, it will directly affect your credit scores. Your credit scores will hover around the lower band which may affect any future loan plans that you might have. Moreover, if loan repayment is defaulted for more than 180 days, lenders can file a case against the defaulter as per Section 138 of the Negotiable Instruments Act 1881.
Ans: Credit information companies assess the credit history of an individual to develop credit reports. It shows the number of open and closed credit accounts, the amount paid, the amount owed, information on EMI payments, credit inquiries, etc. This information helps banks to ascertain the creditworthiness of the borrowers.
Ans: To improve your credit score, consider doing the following:
– Timely repayment of EMIs
– Utilising only up to 30% of the available credit limit
– Limiting the number of loan enquiries.
– Additionally, you should review your credit report annually to track your finances.
Before you go…
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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