What is a No Credit Loan?
No credit loans are given to the people with a very bad credit score, bad repayment history or to a defaulter. The lender provides loans without checking the credit score or CIBIL score. The only thing the lenders see is proof of income that will help the lender to repay the loan. The rate of interest is higher than a normal secured and unsecured loan. The terms and conditions are also different than the normal loans but the lender has to agree to them as obviously, he has chosen a no credit loan because banks will not provide him a normal secured or unsecured loan.
Reasons for Low Credit Score
We normally have a low credit score for the following reasons:
- Non-payment of bills.
- Non-payment or untimely payment of EMIs (Equated Monthly Installments).
- Failing to pay credit card bills.
- A person who has never taken a loan before and is not even in a financial position to take one.
Bad credit installment loans should be only taken when,
- The borrower is in a position to repay the loans and make his credit score high. Otherwise, he will be buried deep down under the debts from where he will never be able to return.
- There is no other way the borrower can manage current debts or the present situation.
- All the lenders have rejected his loan application form due to a low credit score.
- The borrower is a former defaulter in other loans. Even a defaulter in a credit card is taken seriously by the banks.
Advantages of Opting for No Credit Loans
- The borrower doesn’t need to show his credit score.
- The approval time taken is very less and the other normal secured and unsecured loans.
- A higher loan amount can be borrowed if persuaded to the lenders properly.
- The loan repayment time is flexible. It depends upon the comfort of the lender.
- A no credit loan requires very little paperwork and documentation.
- Generally, collateral is not required in these kinds of loans.
- There is no risk for giving away the possession of an asset.
- It helps the borrower when every lender turns back on him.
- Gives a chance to make the credit score high with the repayment of a no credit loan.
- The interest rates fixed and not floating. Hence, even if the rates of interest increase the borrower will pay the interest that was said during the loan disbursal.
Disadvantages of Opting for a No Credit Loan
- Since the loan is being disbursed without any collateral, the lender may keep unfavorable conditions that the borrower has to accept in order to get the loans.
- The loan is given without checking the credit score and documents. So, the rate of interest is high.
- The time given for the repayment of the loan is generally very less.
- They provide a loan from $500 to $5000. So, a person needs more than that cannot apply a no credit loan.
Credit Scores for a No Credit Loan
The first thing one should know is that a credit score of less than 624 is called as bad credit score and a score between 625 to 749 is a fair credit score. The credit score above 750 is a good credit score and above 800 is considered to be an excellent credit score.
No credit loan should be taken only when all the doors of the lenders are closed and make sure it is paid else next time even a no credit loan will be difficult to get.